Hindustan Unilever to merge with GlaxoSmithKline’s Horlicks business

Faith Castro
December 5, 2018

Unilever is to acquire Horlicks and a clutch of other health drink brands in India from drugs maker Glaxosmithkline (GSK) for 3.3 billion euros (£2.94 billion). It values GSKCH at Rs 7,540 per share, which is around 15% premium to the firm's share price of Rs 6,531 as on March 31, 2018.

Following completion of the transaction, which is expected by the end of 2019, GSK intends to sell down its holding in HUL.

"Board of directors approved a scheme of amalgamation between the company and GlaxoSmithKline Consumer Healthcare (GSK CH India) subject to obtaining requisite approvals from statutory authorities and shareholders", the FMCG major said in its filing.

Nitin Paranjpe, president of Unilever's Food & Refreshment business, said the acquisition was "transformative" and would allow the group to enter the Health Foods Drinks category in the market. GSK Consumer Healthcare shareholders will get 4.39 shares of HUL for every share they hold, the company said. The global company GSK, including its group companies, will own 5.7 per cent in the merged entity.

Announcing the deal that also covers "Bangladesh and 20 other predominantly Asian markets", Unilever said the transaction consists of an all-equity merger of HUL with the publicly-listed GSK Consumer Healthcare India and acquisition of 82 per cent stake in GSK Bangladesh Ltd.

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In 2018, the GSK Health Food Drinks portfolio delivered a turnover of around €550m ($628m), primarily through the Horlicks and Boost brands. Horlicks was originally introduced to India in the 1930s.

The average growth rate has been double digit over the last decade, and the category still remains under-penetrated in India.

For GSK, selling the malt-based drinks business will help it increase investments and focus in core pharmaceuticals. The parties expect significant synergies through supply chain opportunities and operational improvements, go-to-market and distribution network optimisation, scale efficiencies in areas such as marketing, and optimisation of overlapping infrastructure. Following completion of the transaction, now expected by the end of next year, GSK intends to sell down its holding in HUL in tranches.

It was taken to India by soldiers who had fought with the British Army in the First World War.GSK was advised by Morgan Stanley and Greenhill, while BofA Merrill Lynch worked with Unilever.

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