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Unilever’s $68 Billion Toothpaste Tilt Needs Another Squeeze

GlaxoSmithKline Plc is right to snub Unilever’s Plc’s 50 billion-pound ($68 billion) proposal to buy the U.K. drugmaker’s consumer healthcare arm. Unilever’s offer may be in the ballpark, but the consumer-goods giant can justify stretching further  and could easily be forced to.

The asset is a unique business with scale and strong brands, including Panadol painkillers and Sensodyne toothpaste. Glaxo’s current plan is to spin it off this year, leaving the company to focus on discovering new medicines. The separation will not provide a clean break:

Unilever's $68 Billion Toothpaste Tilt Needs Another SqueezeGlaxo will be left to sell chunks of the business in the stock market over time. An outright sale at a decent price would surely be better, both for Glaxo and for partner Pfizer Inc., which owns a minority stake.For Unilever’s the acquisition would mark a shift to faster-growing healthcare categories. Its core skills are marketing and global distribution, so it ought to be able to sell branded, over-the-counter medicines better than a science-led pharma company.

Developing some of the Glaxo brands in emerging markets is the obvious opportunity. Bulking up the personal care side of Unilever’s would make that business even more viable as a candidate to be hived off as an independent company.

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