Following Unilever’s (LON: ULVR) signaling of interest in GlaxoSmithKline’s (LON: GSK) Consumer Healthcare unit, the consumer goods giant presented a planned update, setting out the strategic direction Unilever is pursuing.
Unilever Strategic Direction
Following the unification of Unilever, the board undertook an extensive process of reviewing strategic pathways to reposition Unilever’s portfolio into higher-growth categories.
It concluded that Unilever’s future strategic direction lies in materially expanding its presence in health, beauty, and hygiene. These categories offer higher rates of sustainable market growth, with significant opportunities to drive growth through investment and innovation, and by leveraging Unilever’s strong presence in emerging markets.
Consumer Health Is an Attractive Strategic Option
Consumer Health is a highly complementary category for Unilever, with good potential for synergies and a number of avenues to grow.
Forty-five percent of GSK Consumer Healthcare is in oral care and VMS – categories in which Unilever is already present and has substantial capabilities. OTC would be an attractive adjacent category, with the ability to combine Unilever’s consumer and brand expertise with GSK Consumer Health’s technical OTC capabilities. The acquisition would create scale and a platform for growth for the combined portfolio in the United States, China, and India, with new opportunities in other emerging markets.
Unilever believes this would be an attractive and synergistic combination for Unilever shareholders, which would also bring value and certainty to GSK and Pfizer (NYSE: PFE) shareholders.
Wall Street’s Take
Following the news, Credit Suisse analyst Faham Baig kept a Buy rating on ULVR with a 4,800p price target. This implies 30.4% upside potential.
Overall, ULVR scores a Hold consensus rating among analysts based on six Buys, four Holds and five Sells. The average Unilever price target of 3,873.54p implies 5.3% upside potential to current levels.
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