- The stock price of Unilever (NYSE: UL) fell by over 9% pre-market today. This is why it happened.
The stock price of Unilever (NYSE: UL) fell by over 9% pre-market today. Investors are responding negatively to reports that Unilever’s 50 billion pound ($68 billion) offer for GlaxoSmithKline’s consumer healthcare assets is being rejected.
Unilever’s bid for GSK’s assets — which included Sensodyne toothpaste and Advil painkillers — comes at a time that the company is dealing with inflationary issues and slower growth in emerging markets. Plus Unilever CEO Alan Jope is being pressured by shareholders due to subpar stock performance.
Many analysts were not impressed with the bid either. Buying GSK’s consumer health assets for a price of more than 50 billion pounds in cash and stock would nearly triple Unilever’s leverage towards 5.6 times in the first year from 2 times net debt to EBITDA currently, according to Reuters.
“The leverage implied by such a deal would make it less likely they turn around their core business,” said Bernstein analyst Bruno Monteyne via Reuters.
Analysts also pointed out that Unilever’s track record with acquisitions has not done much for driving major growth metrics, citing the $1 billion acquisition of Dollar Shave Club in 2016 and the $25 billion acquisition of Bestfoods in 2000.
Yesterday, Unilever also announced plans to focus more on health, beauty, and hygiene products. This could lead to a spin-off.
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.