Unilever buys GSK Asian health drinks arm for US$3.7 billion

Maricruz Casares
Diciembre 4, 2018

GSK will also offload its 82pc stake in GlaxoSmithKline.

The transaction is an all equity merger with 4.39 shares of HUL being allotted for every share in GSK CH India.

Horlicks has a long history in India - which accounts for nearly 90% of the GSK arm's turnover in Asia - having been introduced there in the 1930s.

But GSK's share price tumbled on news of the deal to further its role in finding new cancer drugs, diving nearly eight percent by the close to £14.98 on London's benchmark FTSE 100 index, which closed up 1.18 percent overall. GSK CH India acquired Maltova and Boost from Jagatjit Industries in 2000.

"GSK's health drinks portfolio is the undisputed leader... in India, with iconic brands such as Horlicks and Boost and a product portfolio supported by strong nutritional claims", the London and Rotterdam-based group added.

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Bournvita, Complan, Pediasure, and Milo are some of the other products in the segment.

The merger, which has been approved by the boards of the respective Indian subsidiaries, but is subject to regulatory and shareholder approvals, will boost HUL's revenues to around Rs 40,000 crore, while catapulting its food and refreshments (F&R) business to around Rs 10,700 crore (28% of HUL's revenues), making it the largest listed F&R business in the country. "This is a very strategic and transformative move for us. 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. "In the past few quarters, Unilever/HUL in India is increasingly getting aggressive on inorganic expansion - Indulekha hair oil, Adityaa ice cream", Abneesh Roy, research analyst, senior vice president, institutional equities, research, Edelweiss Securities, said in a note. The company plans to increase penetration with a focus on rural markets and emerging channels.

"The acquisition of Tesaro will strengthen our pharmaceuticals business by accelerating the build of our oncology pipeline and commercial footprint, along with providing access to new scientific capabilities", GSK chief executive Emma Walmsley said in a statement.

The price being paid for the GSK business is broadly in line with expectations. Shares of GSK CH closed the day at ₹7,542.85, rising 3.75% or ₹272.90.

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