- Ratings agency Fitch said that Unilever's bid for GlaxoSmithKline's consumer health assets would put the consumer goods group's 'A' credit rating at risk because of the huge debt it would have to swallow.
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Unilever's 50 billion pound ($67.88 billion) initial bid for GSK's consumer health arm, which owns brands including Panadol painkillers and Sensodyne toothpaste, was rejected by the pharmaceuticals company.
"Unilever's offer... is likely to raise Unilever's debt to an extent that it would not be able to reduce to levels consistent with an 'A' rating category over 2024-2025, opening the possibility of a multi-notch downgrade into the BBB category," Fitch said in a report.
The ratings agency said the proposed deal would have raised Unilever's net debt to between between 4.5 and 5.0 times EBITDA in 2022, which is above Fitch's threshold of 3.3 times EBITDA for an 'A' rating.
Those metrics would only deteriorate, given that Unilever would need to raise its bid to clinch a deal, Fitch said.
The agency viewed GSK's operations as complementary to Unilever's and the proposed deal would bring cost and sales benefits, but it added that the acquisition would carry a high integration risk.
Echoing concerns raised by several analysts, Fitch said the combination would involve Unilever entering and managing the distribution of over-the-counter medicines while continuing to innovate without access to GSK's pharmaceuticals know-how.
($1 = 0.7366 pounds)