For a fleeting moment, Nestle SA explored what would have been its biggest-ever deal in a move that underscores the consumer giant’s ambition to grow through large acquisitions.  

The Swiss company floated the idea in recent months of acquiring GSK Plc’s consumer health arm, people with knowledge of the matter said. It made informal overtures to express interest in the GSK unit around the same time as Unilever Plc’s £50 billion (US$63 billion) bid for the business that failed in January, the people said.  

As part of its deliberations about a deal, Nestle was considering teaming up with Reckitt Benckiser Group Plc or a similar strategic partner to split up the unit, the people said. However, Nestle quickly dropped its pursuit due to the complexities of a deal and GSK management’s preference for a separate listing of the operations, according to the people.

The revelation comes as GSK pursues one of the largest corporate spinoffs ever attempted in the UK. The unit, now known as Haleon, owns a sprawling portfolio of brands from Advil painkillers to Sensodyne toothpaste. Its plans for a listing come at a time when equity markets globally have been declining amid the war in Ukraine, while new stock offerings have nearly dried up as investors’ risk appetite falls. 

Unilever in January abandoned its bid for the GSK business after the UK drugmaker rejected its approaches and it encountered opposition from its own shareholders. GSK Chief Executive Officer Emma Walmsley has consistently argued that the public markets are the best home for Haleon. She’s been seeking to boost performance amid pressure from activist shareholder Elliott Investment Management. 

MEGA LISTING:

GSK has made clear it’s keen on creating a large independent firm and achieving long-term growth, compared with the short-term profit from a sale, the people said. Nestle’s interest was seen as an exploratory idea not backed by committed financing, so GSK never had to seriously evaluate it, the people said.

The British company remains focused on the spinoff, and there aren’t any active negotiations between the two parties, the people said. Nestle is still monitoring the situation, and it could revisit its interest depending on how Haleon trades after its stock market debut, they said. 

Haleon is in the process of hiring corporate brokers ahead of the planned UK listing, the people said, asking not to be identified discussing confidential information. That move raises the prospect that some large investment banks could switch allegiances in order to represent Haleon, which is expected to immediately become one of the London market’s biggest companies. 

Representatives for Nestle, Reckitt and GSK declined to comment. 

PORTFOLIO PRUNING:

Since taking the helm at Nestle in 2017, CEO Mark Schneider has made targeted acquisitions and sold off several underperforming units. Nestle, Europe’s biggest listed company by market value, has been expanding its presence in faster-growing health and wellness products by snapping up firms like nutritional supplement provider Bountiful Co. and hydration-tablet maker Nuun & Co. 

Schneider said in February the company was more interested in small and mid-sized deals, though it wouldn’t rule out larger purchases. 

Reckitt, the maker of Lysol disinfectants and Durex condoms, has also been revamping its portfolio by offloading businesses seen as less profitable. It has divested its Chinese baby formula unit and has been considering a sale of its remaining infant nutrition operations globally, Bloomberg News reported.

Slough, England-based Reckitt considered buying a portion of Pfizer Inc.’s consumer business in 2018. It eventually backed out of the race, a move applauded by investors at the time.