US Edition
Unilever has ruled out increasing its £50bn offer for GlaxoSmithKline's consumer brands after a "torrent of criticism" from investors sparked questions over the credibility of chief executive Alan Jope.
The Marmite maker said that it is committed to "strict financial discipline" and had seen nothing in financial details shared by GSK to change its view of the appropriate offer price.
It follows a disastrous reaction from shareholders when the takeover plan leaked at the weekend, with analysts warning that Mr Jope's job is now at risk.
Bruno Monteyne, of Bernstein, said: "No investor backs this bid. Our investor call last night was a torrent of criticism along the lines of: 'what on earth are they thinking', 'how can the board even think …', 'desperation'."
Shares in Unilever have fallen almost 8pc since news of the takeover proposal first emerged. The announcement that Unilever would not increase its offer was made after the UK market closed. It sent the business's US depositary receipts up 9pc.
GSK is planning to float its consumer division, which makes items such as Panadol pain relief and Nicorette, and has rebuffed three offers by Unilever to buy it. Unilever's refusal to pay more means any deal is unlikely to go ahead.
Mr Jope attempted to stem Unilever's share price decline on Monday, bringing forward a strategy update in which he said any takeover would come in the context of a shift to grow out its health, hygiene and beauty brands, and dispose of lower-growth areas, which include foods brands.
He said GSK's consumer health arm was not the "only option" for it to buy as part of this shift.
But investors remain sceptical. Bert Flossbach, the founder of top ten shareholder Flossbach van Storch, told the Financial Times: "I would strongly oppose it if it comes to a vote."
Mr Monteyne said even if a deal is agreed for GSK's business, Unilever would be "unlikely to get it approved", and added: "Paying such enormous premiums/valuations for other similar assets will be treated similarly. The boat has sailed."
He added: "That is bad news for Unilever management and the board. Given the performance of the business over recent years; given this sudden change in strategy and the shareholder refusal to back one of the key pieces of the plan, we think management has lost credibility. We would expect management and board change to be the key topics for the next three to six months."
It came after the fund manager Terry Smith last week urged Unilever to stop focusing on social causes and attempt to improve returns, saying: "A company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot."
Mr Monteyne said that shares would be likely to perform better if Unilever's management was ousted.
Proctor & Gamble had also been linked to a GSK consumer bid, but the company said on Wednesday that it did not need a large deal to deliver its goals.
Unilever said: "Unilever is committed to maintaining strict financial discipline to ensure that acquisitions create value for our shareholders."