Update – GSK Consumer Healthcare

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For media and investors only

Issued: London, UK

GlaxoSmithKline (GSK) plc today confirms that it has received three unsolicited, conditional and non-binding proposals from Unilever plc to acquire the GSK Consumer Healthcare business. The last proposal received on December 20, 2021 was for a total acquisition value of £50 billion, comprising £41.7 billion in cash and £8.3 billion in Unilever shares. The Consumer Healthcare business is a joint venture between GSK and Pfizer, with GSK holding a majority stake of 68% and Pfizer 32%.

GSK rejected all three proposals on the grounds that they fundamentally undervalued the Consumer Healthcare business and its future prospects.

GSK’s Board of Directors has a strong focus on maximizing value for GSK shareholders and has carefully assessed each Unilever proposal. In doing so, the Board and its Boards have assessed proposals for financial planning assessments completed to support the proposed mid-2022 business spin-off, including the sales growth outlook presented below.

World leader in Consumer Healthcare
The Consumer Healthcare business has been transformed since 2014 through successful integrations of GSK’s business with the Novartis Consumer Health portfolio in 2015 and the Pfizer portfolio in 2019. Importantly, this transformation also provided a platform to evolve and optimize many aspects of Consumer Healthcare. including the divestment of low-growth brands, the introduction of a new R&D/innovation model, optimization of the supply chain and manufacturing network, as well as continued investment in new digital platforms and capabilities , data and analysis.

This has resulted in the creation of a leading global consumer healthcare business with annual sales of £9.6 billion in 20211. The company has an outstanding portfolio of world-class, category-leading brands; a global scale with a distribution footprint and capacity to serve more than 100 markets; strong brand image, innovation and digital capabilities; and offers a unique proposition that combines reliable science with human understanding.

The business is led by a highly skilled management team with deep experience in consumer healthcare and consumer packaged goods with a strong commitment to achieving its growth objective and ambitions.

Superior growth and very attractive financial profile
The company is well positioned to sustainably grow ahead of its categories in the years to come. The fundamentals of the £150bn consumer healthcare sector are strong, reflecting an increased focus on health and wellbeing, significant demand from an aging population and a emerging middle class, and significant unmet consumer needs.

Over the period 2019-2021, the Consumer Healthcare business recorded organic sales growth of 4% CAGR2 outperforming its categories and despite the negative impact of the COVID pandemic.

The company’s superior sales growth is expected to result from a strategy that puts the consumer at the heart of the business to better meet everyday health and wellness needs, including increasing household penetration. its main brands and capitalizing on new and emerging products. growth opportunities arising from innovation and the use of new technologies and digital platforms, all supported by continued strong execution and financial discipline. In the medium term, the superior sales growth should be mainly driven by the continued momentum of the key brands in the areas of Oral Care, VMS and Pain Relief; the acceleration of innovation in the United States and China; and continued growth in emerging markets.

Given these trends and the investments made and planned for the business, the GSK Board of Directors is confident that the Consumer Healthcare business can sustainably generate annual organic sales growth in the range of 4 to 6 % (CER) in the medium term.

The combination of superior organic sales growth, operating margin expansion and consistent high cash generation will, we believe, provide existing and potential shareholders with a very attractive financial profile that facilitates continued investments in growth, obtaining attractive returns and the possibility of continued participation. in creating long-term value.

The proposals did not fundamentally reflect the intrinsic value of the business and its potential
GSK’s board of directors unanimously concluded that the proposals were not in the best interests of GSK shareholders because they fundamentally undervalued the Consumer Healthcare business and its future prospects.

GSK’s board therefore remains focused on executing its plan to spin off the Consumer Healthcare business, to create a new leading independent global consumer products company which, subject to shareholders, should be completed in mid-2022.

Capital Markets Event
GSK intends to share more details on strategy, brands, capabilities and operations, including detailed financial information and future growth ambitions for the new Consumer Healthcare business during a virtual market day of capital for investors and analysts on Monday, February 28, 2022.

Remarks

1Not audited. (GSK’s 2021 annual results will be announced on February 9, 2022)

2 Excluding the impact of brands sold/under revision, on a CER basis

About GSK
GSK is a science-driven global healthcare company. For more information, visit www.gsk.com/about-us.

Caution Regarding Forward-Looking Statements
This announcement contains statements that are, or may be deemed to be, “forward-looking statements”. GSK cautions investors that any forward-looking statements or projections made by GSK, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These factors include, but are not limited to, those described in the Company’s Annual Report on Form 20-F for 2020, GSK’s third quarter 2021 results and any impacts from the COVID-19 pandemic. GSK undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, there can be no assurance that any particular expectation will be satisfied and investors are cautioned not to place undue reliance on forward-looking statements.

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