Unilever UL shares surged higher Wednesday after the brands giant said it won't increase its offer for the consumer healthcare division of GlaxoSmithKline GSK beyond £50 billion.
GSK, which is planning to spin-off the consumer group as part of a plan to boost investor returns, said Saturday that Unilever's bid -- valued at around $68 billion -- "fundamentally undervalued" the division, which includes brands such as Sensodyne toothpaste and Panadol painkillers. The group was reportedly looking for an offer in the region of £60 billion following the addition of brands from Novartis in 2015 and Pfizer (PFE) - Get Pfizer Inc. Report in 2019.
Unilever is looking to add the division to its own stable of consumer healthcare brands amid big changes in the industry, including the separation of a similar division at Johnson & Johnson (JNJ) - Get Johnson & Johnson Report later this year.
"Unilever is committed to maintaining strict financial discipline to ensure that acquisitions create value for our shareholders," the company said in a statement to the London Stock Exchange.
"Unilever also reiterates its commitment to continuing to improve the performance of its existing portfolio through its ongoing focus on operational excellence, its upcoming reorganisation and by rotating the portfolio to higher growth categories."
Unilever's U.S.-listed shares were marked 8.8% higher in mid-day trading in New York following the update to change hands at $50.49 each while GlaxoSmithKline fell 1.7% to $46.00 each.
Consumer brands companies are finding increasing favor among investors as inflation pressures continue to rise, given their ability to pass increased input costs, as well as shipping rates, onto customers.
Procter & Gamble (PG) - Get Procter & Gamble Company Report shares, in fact, were one of the top gainers on the Dow Wednesday after it posted better-than-expected second quarter earnings and boosted its full-year sales forecast as the consumer brands group said it's making 'significant' progress in offsetting higher freight and commodity costs.