Market report

GSK rises on Unilever interest | Amazon pulls Visa threat


5pm: Markets lifted by Unilever offer

London wasn’t short excitement with the blue chip FTSE 100 index lifted 68.28 points to 7611,.23 on the back of Unilever’s interest in GlaxoSmithKline’s consumer division, says AJ Bell financial analyst Danni Hewson.

“Investors clearly liked Unilever’s move to snap up GSK’s healthcare line even if they weren’t so keen on the prospect that the former might need to tap up shareholders to help fund any acquisition,” she says. “Just the possibility of a deal gave fellow consumer health care giant Reckitt Benckiser a lift, investors wondering if 2022 will do for the sector what 2021 did for supermarkets.” GSK was 3.91% higher while Unilever shares ended the day down 6.52%.

Taylor Wimpey gained 4.19% after the housebuilder said it was set to meet its annual targets following an “excellent” year and pledged to return excess cash to shareholders.

However, it was Amazon‘s announcement that it would not stop taking Visa credit card payments on its site in two days’ time that really caught the eye.

“It suggests a deal is close to being agreed though neither company has set out a timescale. It’s tough to say which business stood to lose the most from the end of their relationship but the consumer would definitely have taken a hit,”says Hewson.

“Who blinked? It’s unlikely we’ll ever get full details of which of the two giants won this particular round, but be sure with such vast sums of money involved if one party isn’t happy we may well see the issue crop up again before too long.”

10am: ScotWind Leasing projects chosen

The Scottish government was handed a £700 million boost for public services today after successful bidders were announced to build the next generation of offshore wind farms.

Full story here

9.30am: GSK is early riser

Drugs maker GlaxoSmithKline was the big early riser, up 5.2%, following a £50bn bid approach from Unilever for consumer business it jointly owns with American giant Pfizer (see below).

Unilever fell 6% ahead of a likely further hike in the offer after three indicative approaches were rebuffed.

Russ Mould, investment director at AJ Bell says: “The market has given a thumbs down to news that Unilever has bid for GlaxoSmithKline’s consumer goods division. The negative share price reaction probably reflects investors’ fears that Unilever is going to come back with a higher offer and potentially pay too much.

“GlaxoSmithKline’s share price has jumped on the news as Unilever’s actions effectively fire the starting gun for a bid war for the consumer goods unit. Nestle could be interested, so too private equity.

“Unilever looks to be bidding for the unit because it needs to inject some excitement into its business, having recently disappointed with sales and profit margins.

“This really is a Marmite situation for GlaxoSmithKline’s shareholders – they’re either hoping for a quick return now through a sale or better returns in the future through the planned demerger.

“GlaxoSmithKline chief executive Emma Walmsley would be delighted if someone came and paid top dollar for the unit, as she’s been under pressure from investors to deliver some good news for a long time.”

The tussle helped the FTSE 100 edge through the 7,600 level, up 57.53 points at 7,600.48.

Traders were largely unswayed as China posted weak retail sales and industrial output numbers (see below).

7am: Unilever talks up GSK ‘strategic fit’

Household goods giant Unilever insists the consumer healthcare arm of GlaxoSmithKline was a “strong strategic fit” for the company.

Its comments came after GSK confirmed over the weekend it had rejected a £50bn offer for the consumer healthcare division which owns the Panadol and Nicorette brands.

In a statement, Unilever said: “Consumer Health is a highly complementary category for Unilever, with good potential for synergies and a number of routes to build scale.

“GSK Consumer Healthcare would be a strong strategic fit. 45% of GSK Consumer Healthcare is in Oral Care and VMS – categories in which Unilever already has presence and substantial capabilities.

“The acquisition would create scale and a growth platform for the combined portfolio in the US, China, and India, with further opportunities in other emerging markets. We believe that this would be an attractive and synergistic combination for the shareholders of Unilever, which would also deliver value and certainty for the shareholders of GSK and Pfizer.”

Analysts said the bid represented a modest premium to current value. The latest offer, made on 20 December, was made up of £41.7bn in cash and £8.3bn in Unilever shares.

GSK said the offer “fundamentally undervalued” the consumer business and its future prospects, adding that it was still committed to separate the business from its medical arm and float it on the London Stock Exchange. Valuations by analysts have ranged from £45bn to £48bn.

Unilever added that it would announce a “major initiative to enhance our performance” later this month.

7am: Bio boss steps down

Oxford Biomedica chief executive John Dawson said he was stepping down after 13 years at the helm of the Gene and cell therapy firm which helped develop a Covid-19 vaccine with AstraZeneca.

“I believe this is the right time to start the transition to a new leader given the robustness of the senior team and company as a whole, which is undoubtedly stronger than ever before,” he said in a statement.

Oxford Biomedica chairman Dr Roch Doliveux said it had started searching for Mr Dawson’s replacement to “lead the group through its next phase of growth”.

AstraZeneca also said its Daiichi Sankyo cancer collaboration Enhertu had been granted priority review by the Federal Drug Administration in the US.

Global markets

China’s Central Bank announced a cut to bank lending rates after its economy showed signs of slowing.

Gross domestic product (GDP) grew by 4% for the last three months of 2021 from a year earlier, the National Bureau of Statistics said.

That was better than most economists had predicted but was a lot slower than the previous quarter. In another sign of weakness retail sales growth for December fell to 1.7%. The economy grew by 8.1% last year but the data has yet to take into account the effect of the latest coronavirus outbreaks.

Japan is said to be ready to raise its forecasts for growth and inflation before clarifying its stance on interest rates.

The Nikkei in Japan rose 0.74% while South Korea’s Kospi fell 1.09%. China’s Shanghai Composite gained 0.63% but Hong Kong’s Hang Seng index fell 0.64%.

Oil prices have surged with Brent crude hitting a three-year high of almost US$84 a barrel.

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