GSK Share Price: More Gains Likely After the Unilever Offer

Summary:
• The GSK share price is hovering near its highest level since February 2021. The stock has made a strong comeback

The GSK share price is hovering near its highest level since February 2021. The stock has made a strong comeback considering that it has jumped by over 43% from its lowest level in February 2021.

GlaxoSmithKline in the spotlight

GSK has been in a turnaround in the past few months. Under the current CEO, Emma Walmsley, the company is breaking itself apart in a bid to be more competitive. One approach has been to break its business by separating its consumer-facing business. It is a similar approach to what Johnson & Johnson is doing. 

The company aims to approach this turnaround by spinning the consumer business into an independent company. In the past, some investors worried that the spin-off was the wrong strategy for the company. They proposed an outright sell-off to a private equity company or a competitor.

During the weekend, we learned that the company had rejected a 50 billion pound offer from Unilever. In a statement, the management said that the offer significantly undervalued the consumer business. Emma said:

“In this case, after careful review of Unilever’s proposals, we decided that they fundamentally failed to recognize the value and the potential we see for Consumer Healthcare.”

GSK turned away three approaches for the company. Therefore, the GSK share price will likely see some volatility on Monday as investors assess the situation. There are three main scenarios for the business. First, GSK may continue with the strategy and list the business in London and New York.

Second, Unilver can decide to up its offer for the GSK Consumer Healthcare business. And finally, the company could receive a bigger bid from another company. Pfizer owns about 32% of the division.

GSK share price forecast

The daily chart shows that the GSK share price has been in a strong bullish trend in the past few months as investors assess Emma Walmsly’s turnaround strategy. The stock remains above the 25-day and 50-day moving averages. It is also above the ascending trendline that is shown in black. The Relative Strength Index (RSI) has also been rising.

Therefore, because of the new events, there is a likelihood that the GlaxoSmithKline share price will keep rising in the near term. This could see it jump to the 2020 high of 1,670p. This view will be invalidated if the stock moves below the support at 1,578p.