Unilever rules out major acquisitions after GSK’s failed £50bn consumer bid

Unilever has ruled out any major takeovers in the near future following its failed £50 billion bid for GlaxoSmithKline’s consumer unit, as the Dove soap maker warned its business would suffer from rising inflation.

The consumer goods giant, which makes Marmite and Ben & Jerry’s ice creams, has signalled that customers will have to pay higher prices as the company tries to keep a lid on soaring costs.

It comes in Unilever’s first market update after its bid to take over GSK’s consumer business – which includes brands such as Sensodyne and Panadol – was rejected by the pharmaceutical giant and heavily criticised by investors.

The FTSE 100 company was just days away from announcing its failed takeover bid when Fundsmith founder and lead investor Terry Smith accused the company of putting sustainability ahead of financial performance.

Unilever said on Thursday it had held a detailed discussion with its shareholders about the move and “now recognises there is no interest in this transaction or anything similar”.

The company confirmed it intends to focus on its current product portfolio, growing the business organically and through smaller, add-on acquisitions.

We have been engaging intensively with our shareholders in recent weeks and have received a strong signal that the evolution of our portfolio needs to be measured. That is why we do not intend to make any major acquisitions in the foreseeable future

Alan Jope, Unilever

Group CEO Alan Jope said: “We have been engaging intensively with our shareholders in recent weeks and have received a clear message that the evolution of our portfolio needs to be measured.

“Accordingly, we do not intend to make any major acquisitions in the near future and will conduct a share buyback programme of up to €3 billion (£2.53 billion) over the next two years.”

Unilever also told shareholders it expects cost inflation of €2 billion (£1.7 billion) in the first half of 2022.

Chief financial officer Graeme Pitkethly said the company’s operations had been significantly impacted by rising transportation costs and increases in the cost of oils used in its products, such as a 130 per cent increase in the price of palm oil.

The Group recorded a 4.5% increase in sales in 2021, driven by higher prices.

Unilever said the price increase was driven by a 2.9% increase, with the remaining 1.6% coming from volume growth as the group reported strong sales in its food segment, with brands such as Magnum and Ben & Jerry’s performing particularly well.

The company is forecasting sales growth of between 4.5% and 6.5% in 2022 as it seeks to maintain price increases to offset cost inflation.

Still, Unilever also cut its profit margin forecast for the year, sending shares lower after markets opened on Thursday.