Unilever shares slumped Monday as the consumer products giant suggested it might increase its offer for GlaxoSmithKline’s consumer health unit.
Unilever ULVR, -5.94% fell 7% as Glaxo revealed it’s rejected a £50 billion ($68 billion) offer, while Unilever said the unit might be a “strong strategic fit” and said “there can be no certainty that any agreement will be reached.”
Analysts at UBS said Unilever’s operational difficulties are the result of its challenging product category rather than subpar execution, and “we therefore believe that a transformational deal remains Unilever’s fastest way out of its current operational predicament.” But they added the magnitude of the offer was about half of its market cap, and done from a position of weakness following a year of share-price underperformance.
Unilever shares have dropped 17% over the last 52 weeks, while the FTSE 100 has gained 13%.
Glaxo GSK, +4.33% shares by contrast rallied 4%. Glaxo is the majority owner of the consumer health unit, and its partner Pfizer has a 32% stake.
Other U.K. stocks were generally stronger with U.S. markets closed in observance of the Martin Luther King Jr. holiday.
The FTSE 100 UKX, +0.96% rose 0.8% to 7602.15 in afternoon trade.
U.K. builder Taylor Wimpey TW, +3.22% rose 3% after saying fiscal year operating profit will be in line with current guidance after volumes rose 47% on a 4% increase in average selling price.