LONDON MARKET OPEN: Glaxo buoyed by Unilever's consumer arm approach

(Alliance News) - The FTSE 100 started the new week on the front foot, with gains for GlaxoSmithKline and miners helping to offset Unilever's drag on the blue-chip index, as it confirmed an approach for GSK Consumer Healthcare.

The FTSE 100 index was up 48.05 points, or 0.6%, at 7,591.00 early Monday. The mid-cap FTSE 250 index was up 68.18 points, or 0.3%, at 22,811.53. The AIM All-Share index was up 3.67 points, or 0.3%, at 1,163.54.

The Cboe UK 100 index was up 0.6% at 753.26. The Cboe 250 was up 0.4% at 20,420.24 and the Cboe Small Companies up 0.4% at 15,796.49.

In mainland Europe, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.3% early Monday.

GlaxoSmithKline topped the FTSE 100, up 4.6% in early dealings. Unilever confirmed its takeover approach for GSK Consumer Healthcare.

Unilever also set out its strategic plans, aiming to push further into health, beauty and hygiene. These categories offer "higher rates of sustainable market growth", it said, adding that major acquisitions should be carried out alongside the divestment of lower growth brands.

GSK Consumer Healthcare would be a good fit with this new direction, Unilever explained. The deal would combine Unilever's consumer and branding knowledge with GSK Consumer Health's technical over-the-counter capabilities.

Unilever shares fell 6.3% in opening trade.

Over the weekend, GlaxoSmithKline confirmed it received and rejected three unsolicited and non-binding bids for its Consumer Healthcare business from consumer goods maker Unilever.

The latest offer from Unilever was made on December 20 and had a total acquisition value of GBP50 billion, comprising GBP41.7 billion in cash and GBP8.3 billion in Unilever shares. The offer was rejected by the Brentford, England-based pharmaceutical group, on the grounds that the offer undervalued the business. The approach was first reported by the Sunday Times newspaper on Saturday.

The GSK Consumer Healthcare business was formed in August 2019 as a joint venture with Pfizer, which has a 32% interest, while GSK holds the remaining 68%.

Unilever said: "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."

Marc Kimsey, equity trader at Frederick & Oliver, commented: "GSK is thought to be holding out for GBP60 billion, Unilever is expected to return with an improved offer."

Antofagasta rose 2.8% after UBS upgraded the miner to Neutral from Sell. The basic materials sector also was boosted by China's latest economic growth data.

The world's second-biggest economy, a key buyer of minerals, expanded 8.1% in 2021, National Bureau of Statistics data showed, beating forecasts of 8.0% in an AFP poll, and the 2.3% reading for 2020. But much of that growth came in the first half of the year, with the Chinese economy shaken by a series of shocks towards the end of 2021.

The gross domestic product figures came as China's central bank cut the rate on its one-year policy loans to 2.85%, the first drop since April 2020 at the height of the pandemic and a clear signal from authorities that the outlook this year remains uncertain.

Miners Glencore and Anglo American rose 1.3% and 1.4% respectively.

Taylor Wimpey rose 2.1% as it backed market forecasts for 2021 in a year which saw strong demand for its homes.

Total UK home completions rose by 47% to 14,087 in 2021, and the net private reservation rate was 0.91 homes per outlet per week, up from the previous year's 0.76. Demand was underpinned by low interest rates and good mortgage availability, while house price inflation fully offset cost pressures.

The business "performed very well", and the housebuilder expects to report 2021 results in line with expectations, with significant improvement in operating margin. The current year has started well, with forward indicators positive despite wider economic uncertainty.

In the FTSE 250, Ashmore fell 2.6% after the emerging markets asset manager reported a decline in assets under management over the course of the last three months of 2021.

Assets under management finished December at USD87.3 billion, down from USD91.3 billion at the end of September. This decline comprised net outflows of USD2.2 billion and negative investment performance of USD1.8 billion.

"Against the backdrop of generally declining Emerging Markets over the quarter, Ashmore's relative performance was positive in local currency, equity and investment grade strategies, and weaker in some US dollar-denominated strategies," the firm highlighted.

In China, the Shanghai Composite ended up 0.6% on Monday, while the Hang Seng index in Hong Kong was down 0.7% in late trade. The S&P/ASX 200 in Sydney closed up 0.3%, and the Nikkei 225 in Tokyo ended up 0.7%. Against the yen, the dollar was quoted at JPY114.36 early Monday in London, up from JPY113.82 late Friday.

The euro traded at USD1.1431 early Monday, firm versus USD1.1423. Sterling was quoted at USD1.3684, firm against USD1.3675 at the London equities close on Friday.

Gold was quoted at USD1,822.29 an ounce early Monday, up from USD1,818.19 on Friday. Brent oil was trading at USD86.18 a barrel, higher than USD85.56 late Friday.

By Lucy Heming; lucyheming@alliancenews.com

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