BoA stays 'neutral' on Unilever, says upside and downside risks 'well balanced'.


Analysts at Bank of America reiterated their 'neutral' recommendation for shares of Unilever following news at the weekend that it had made three bids for GlaxoSmithKline's consumer health business, telling clients they belived that upside and downside risks to the share price were "well balanced" at current levels.

Unilever

Source: Sharecast

On the plus side, the proposed deal would help rectify Unilever management's excessive focus on profitability be a step in the right direction towards growing its topline, while giving it exposure to leadership in faster-growing categories.

But there was limited scope for synergies due to Unilever's scant presence in consumer health, oral care and nutrition, they added.

To that one could add Unilever's lack of experience in over-the-counter consumer health products and possible competition concerns in oral care, as the company's market share would be in excess of 35%.

Lastly, given the increasingly costly rejections of its offers, and the resulting increase in its projected indebtedness if it succeded, BoA believed that any potential hike in the offer price would likely be in shares or require further disposals of "sizeable parts of the business".

They estimated that a £41bn increase in the company's debt would push its net debt as a proportion of earnings before interest, taxes, depreciation and amortisation to 4.5-5.0 times, which would be more than its European Food/HPC peers.

BoA stood by its 4,500.0p target price on the stock.


ISIN: GB00BN7SWP63
Exchange: London Stock Exchange
Sell:
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Change: -6.50 ( -0.36 %)
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