Unilever to buy GSK consumer healthcare brands

Grant Boone
December 5, 2018

Unilever is to buy GlaxoSmithKline's Horlicks nutrition business for $3.8 billion (R51bn), boosting the Anglo-Dutch group's position in India with the addition of the malted drink.

With this proposed strategic merger with GSK Consumer Healthcare India (GSK CH), HUL plans to expand its portfolio with great brands into a new category catering to the nutritional needs of our consumers.

While fresh shares of HUL will be issued to GSK Plc, it will result in Unilever's shareholding in HUL declining to 61.9 per cent from 67.2 per cent prior to the merger with GSK Consumer Healthcare. Nearly 90 per cent of the turnover is in India.

Originally introduced in the 1930s, Horlicks products have a long history in India.

"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", said Emma Walmsley, CEO, GSK.

HUL CFO Srinivas Pathak said at present the company's F&R business is at around '2,400 crore.

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Nitin Paranjpe, president of food and refreshment at Unilever, said: "The iconic Horlicks brand has a deep heritage, credibility and resonance around the world". The company's turnover of its food and refreshment business would surpass Rs. 10,000 crore, placing it among the largest F&R businesses in the country.

HUL is expecting the GSK deal to be completed in one year. GSK Consumer Healthcare and HUL have agreed to a share exchange ratio of 4.39 shares of HUL for every one share of GSK Consumer India, the two companies said in separate filings with the stock exchanges.

Credit Suisse has also raised its target price for HUL from ₹1,770 to ₹1,900 while stating that the deal would make HUL's food and refreshment business in India 1.6 times larger and give it a strong nutrition brand, which can be leveraged in more categories.

Unilever has inked an agreement to acquire GlaxoSmithKline's (GSK) health food drinks (HFD) portfolio in India, Bangladesh and 20 other predominantly Asian markets. However, brands like Boost, Viva and Maltova will remain with the merged entity. Upon completion, it could tentatively add Rs 4 to HUL's earnings per share, feels Solanki.

The maker of Taj Mahal tea is also looking to strengthen its play in the category as it operates only in 15 percent of the market which is heavily penetrated and growing at 9 percent, according to Sitapati.

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