Following the completion of its previously announced strategic review, GlaxoSmithKline Plc yesterday announced the divestment of Horlicks and other consumer healthcare nutrition brands to Unilever Plc and the merger of GSK Consumer Healthcare Ltd. (GSK India) with Hindustan Unilever Ltd. for a total consideration valued at approximately £3.1 billion. The deal value is based on the 15-day volume weighted average price (VWAP) ending Friday 30 November 2018 of HUL shares of INR 1,717. Net proceeds are estimated to be approximately £2.4 billion on the same basis.
In India, Horlicks and other nutrition products are sold by GSK India, a public company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), in which GSK holds a 72.5% stake.
The proposed transaction involves the merger of GSK India with HUL, a public company listed on the NSE and BSE, following which GSK will own approximately 5.7% of HUL. The merger values GSK India at INR317 billion in total, or INR7,540 per share, a 15.4% premium to the un-disturbed share price of INR6,531 as at close of business on 26 March. Following completion of the transaction, currently expected by the end of 2019, GSK intends to sell down its holding in HUL. Such sell down will be in tranches and at such times as GSK considers appropriate, taking into account market conditions.
In addition, GSK is to sell its 82% stake in GlaxoSmithKline Bangladesh Limited and other related brand rights for GSK’s consumer healthcare nutrition activities in certain other territories to Unilever, for which it is expected to receive cash proceeds equivalent to £566 million. India remains an important market for GSK and the company will continue to invest in growth opportunities for its OTC and Oral Health brands there, which include Crocin, Eno and Sensodyne. Following completion of the transaction, HUL will distribute GSK’s OTC and Oral Health brands that are currently distributed by GSK India. This arrangement will be for a period of five years. HUL is the largest FMCG company in the country, with strong distribution reaching over seven million outlets across India.
GSK Chief Executive Officer 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.” Proceeds will be used to support the Group’s strategic priorities and reduce debt and the transaction is expected to be neutral to earnings. The businesses being divested had in the nine months to 30 September sales of £406 million and contributed an operating profit margin percentage in the low 20s.