Glaxo is right to hold out for a better offer

As one of the largest consumer health businesses in the world, Glaxosmithkline’s over-the-counter unit was always likely to attract corporate rivals. Therefore the most surprising aspect of this weekend’s news – that Unilever had bid three times for the business – was that interested parties took so long to show their hands. With a value of at least £50bn ($68bn) not many could afford it, of course, and it is far from certain that Unilever will be able to offer sufficient cash to persuade the Glaxo board to veer from its long-stated strategy. The spin-off into a separately listed company, around mid-year, will proceed as planned, Glaxo insists. Many large institutional investors have expressed enthusiasm for holding the new business's shares, and several analysts have declared the offer lowball; the FT reported this weekend that offers in the region of £60bn would warrant more serious consideration. Such a sum would provide Glaxo with serious firepower to rebuild its drugs business, but a trade sale would take many more months to consummate than the spin-off, which has been years in the making and is now just around the corner. Glaxo is right to hold out for an offer it cannot refuse.

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