Unilever agrees £3.1bn Horlicks deal with GSK
By Oliver Haill
Date: Monday 03 Dec 2018
(Sharecast News) - Unilever has struck a deal to buy Horlicks and other nutrition brands listed in India and Bangladesh from GlaxoSmithKline for roughly £3.1bn.
Glaxo's 72.5%-owned subsidiary GSK Consumer Healthcare, known as GSK India, would be merged with Hindustan Unilever, in which parent Unilever owns 67.2%. Both companies are listed on India's National Stock Exchange and Bombay Stock Exchange in Mumbai.
As part of the estimated £3.1bn total transaction price, Unilever will pay around £0.57bn for GSK's 82% stake in its Bangladeshi business, which includes various brand rights for GSK's consumer healthcare nutrition activities in certain other territories.
Unilever said its total consideration was €3.3bn of cash and shares in Hindustan Unilever.
GSK, which had been in exclusive talks with its fellow FTSE 100 company after other interested parties dropped out of the buying process, said its net proceeds from the sale of the GSK India and Bangladesh stakes was estimated to be around £2.4bn and that it would be left with a stake of 5.7% in the merged Indian entity, which it would sell down gradually.
GSK India's health-food-drinks (HFD) portfolio generated turnover of around €550m in 2018, primarily through the Horlicks and Boost brands, with 90% of this coming from India. The deal values it at 317bn Indian rupees in total, or 7,540 rupees per share, a 15.4% premium to the share price at close of business on 26 March.
GSK chief executive Emma Walmsley said: "Horlicks has made a significant contribution to GSK and to the health of consumers across India for many decades and we believe Unilever is well placed to maximise its future potential. Proceeds from this transaction will be used to support the Group's strategic priorities, including investing in our pharmaceutical business."
Despite the HFD portfolio's "long history in India" and double-digit growth over the last 15 years, Unilver said it was "well positioned to further develop the market given the extent of its reach and capabilities" of the category that "still remains under-penetrated in India".
Unilever's food & refreshment chief, Nitin Paranjpe, said: "The acquisition is transformative for our Foods and Refreshment business allowing us to enter the health foods drinks category, further strengthening our position in health and wellness. It is rare to be able to acquire brands with such leading market positions and fantastic consumer equity in one of the world's most exciting and fast-growing markets. Improving the health and wellbeing of 1 billion people by 2020 is a key pillar in our Unilever Sustainable Living Plan."
Just a couple of hours later, GSK announced that it would spend all the cash from the deal and more to buy US specialist oncology pharma company Tesaro for $5.1bn (£4bn).
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