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It was fun while it lasted. Unilever says it won’t bump up its £50bn offer for GlaxoSmithKline’s consumer products division, so one has to assume that’s the end of the saga. GSK’s board, after all, can’t credibly have second thoughts about entering a negotiation: it had rejected £50bn as a “fundamental undervaluation”.
Yet two big questions remain for Unilever’s board. First, why wasn’t the refusal to improve the offer made on Monday this week? On that day, remember, chief executive Alan Jope emphasised exactly the same commitment to “strict financial discipline” but also declined to rule out a higher bid.
The natural explanation is that Unilever’s shareholders lobbied furiously to get the expedition called off. The share price fell 10% in two days, which was a clear sign of little confidence in the plan. At £50bn, investors might have been persuadable; but not at a higher price.
In the circumstances, the board had little choice but to retreat. Even so, delivering a minor heart attack to the share price, however temporarily, is not a good look.
The out-of-blue factor points to the second question: what’s plan B? There has to be one because Jope also said on Monday that there were alternative options to pursue the new goal of being bigger in healthcare.
That could mean anything from taking aim at another mega-sized target, such as Johnson & Johnson’s consumer division or Reckitt, or a series of smaller deals. Either way, uncertainty hangs in the air.
The shame is that the GSK business looked a good fit. And there’s nothing wrong with the ambition to expand in healthcare while slimming the food side.
But, after three days of excitement, Unilever has succeeded only in showing how difficult it could be to execute its change of direction. Jope has a trust-building challenge with shareholders.
High hopes for Hal Barron’s low-profile successor
It’s not plain sailing over at GSK either. Hal Barron’s exit as chief scientific officer is a heavy loss in a critical year. Barron was the first major hire by Emma Walmsley after she became chief executive in 2017 and he arrived with a stellar reputation from the US, injecting credibility into Walmsley’s pitch that her top priority was to reinvigorate GSK’s pipeline of new drugs.
Since true reinvigoration at a pharma company can take a decade, Barron’s four years in post don’t qualify as a full innings.
That is especially so when “new GSK”, without its consumer division (now destined for demerger in the summer unless somebody other than Unilever wants to take a pop), will stand or fall by results from the labs.
Barron is 60, so one can speculate that, if he’s minded to do another big job, he thinks this is the moment. He’s off to be chief executive of Altos Labs, one of those San Francisco startups backed by billionaires, including Jeff Bezos, that will probably become enormous.
It is targeting the hot scientific field of cell rejuvenation. One can also guess that Barron has sufficient zillions to go where his scientific interest takes him: his 16 years at the hugely successful US firm Genentech will have been rewarding.
From GSK’s point of view, the best one can say is that Barron is staying until the end of July and will be a day-a-week nonexecutive director thereafter. It’s an unusual arrangement but probably pragmatic.
Barron’s successor is internal appointment Tony Wood, 56, who has a low profile in the City but may be a name to watch. The last Brit in the same role at GSK was pandemic TV star Sir Patrick Vallance, otherwise known as the government’s chief scientific adviser.
Bonuses look out of place at WH Smith
Last year will not have felt like a bonus year for WH Smith’s shareholders. The retail group made a pretax loss of £116m, mostly for obvious Covid reasons. The share price, having been clobbered at the start of the pandemic, went roughly sideways. There was no dividend.
WH Smith’s remuneration committee, on the other hand, preferred to emphasise the “outstanding, inspiring and resourceful leadership” of Carl Cowling, the chief executive, and Robert Moorhead, the chief financial officer.
Cue bonuses, justified on the ground that EBITDA (earnings before interest, tax, depreciation and amortisation) targets were hit.
Seemingly sensing it might all look odd, the committee knocked 22% off the bonuses to recognise, in the cute phrasing, “the experience of shareholders and other stakeholders”.
Well, yes, the experience of taxpayers is one of sending furlough payments to WH Smith’s staff only to see bonuses of £550,000 and £357,500 emerge for the bosses.
Almost 46% of votes were cast against the pay report on Wednesday. It is hard to fathom what the other shareholders were thinking.
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