February 22, 2019

Unilever buys GSK’s Indian Horlicks business for 3.3 billion euros

05 December 2018, 08:33 | Randall Craig

Unilever invests in India with €3.3bn deal for GlaxoSmithKline's Horlicks

Sensex marks sixth straight session of gains

Apart from selling the consumer healthcare business in India, GSK is also selling 82 per cent stake in its unit in Bangladesh and brand rights for GSK's consumer healthcare nutrition activities in few other markets to Unilever separately, for 566 million GBP in cash. GSK Consumer India is valued at Rs 31,700 crore as per the deal and the detailed evaluation will be completed in 12 months.

The total consideration for the transaction is c.€4.6bn, of which Unilever's implied contribution through both cash and through the issue of shares in HUL, its listed subsidiary in India, totals c.€3.3bn.

The deal is likely to shake up India's consumer food goods sector and add pressure on HUL's rivals in the FMCG space as it upgrades GSK's brands and uses its widespread distribution network of almost eight million outlets to maximise sales, especially in rural areas.

GSK has said that India remains an important market for the company, where it will continue to invest in and grow its OTC and oral healthcare brands like Crocin, Eno antacid and Sensodyne toothpaste.

Horlics, the drink being used by hundreds of people as energy supplements for the past 100 years has been bought by Hindustan Unilever (HUL), the country's largest consumer company.

The deal will give GSK a 5.7% stake in the resulting company which it intends to sell off in tranches.

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.

The price being paid for the GSK business, which includes the popular malt-based drinks Horlicks and Boost, is broadly in line with expectations.

The GSK CH India business delivered total turnover of around Rs 4,200 crore in FY18, primarily through its Horlicks and Boost brands. "I am confident that this merger will create significant shareholder value through both revenue growth and cost synergies", said Sanjiv Mehta, chairman and managing director, HUL.

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

Though analysts have been cautioning that the category in which Horlicks operates has witnessed stagnant growth, Unilever is bullish about bringing this brand within its portfolio. HUL is well positioned to further develop the market given the extent of its reach and capabilities.

The deal entails multiple transactions. Yesterday, it had said it would put together a restructuring team once it gets shareholders' and regulatory approvals.

GSK reportedly looked at several other companies as well such as Nestle India, Coca-Cola Co. and ITC.

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