Unilever’s £50bn health cheque

WHEN UNILEVERGSKGSKA bought Bestfoods for $20.3bn at the turn of the millennium, it was one of the largest cash acquisitions ever. After two failed bids, the British consumer-goods giant dug up an extra $2bn to sweeten the deal. It divested 700 of its brands in the year that followed but replenished its larder with Bestfoods’ Knorr soup and Hellman’s mayonnaise. Now, in pursuit of another mega merger that could be four times as big, Unilever has been prepared to dispose of the larder entirely.Unilever’s new target has been the consumer-health unit of GlaxoSmithKline (), a British drugmaker. On January 15th it emerged that the soup-to-soap group was offering to pay £50bn ($68bn) for the business. , which has been keen to ditch the division in order to focus on more lucrative prescription medicines, refused to bite. The markets choked: Unilever’s share price fell by 7% the next trading day. Analysts are almost uniform in their view that the deal is a bad idea, arguing that it presents more risk than Unilever, with a market capitalisation of £94bn, can stomach. Selling lagging categories like food may not be enough to fund the transaction, of which nearly £42bn would be in cash. Fitch, a ratings agency, warned that Unilever could lose its credit rating if it took on too much debt.