Published: Tue, December 04, 2018
Medicine | By Brett Sutton

Unilever To Buy GlaxoSmithKline's Horlicks Unit For $3.8 Billion

Unilever To Buy GlaxoSmithKline's Horlicks Unit For $3.8 Billion

GlaxoSmithKline had initiated a strategic review of milk drinks brand Horlicks and its other consumer healthcare nutrition products businesses in order to support its $13 billion deal to buy Novartis' 36.5% stake in their consumer healthcare joint venture.

"The iconic Horlicks brand has a deep heritage, credibility and resonance around the world". With this, the company will expand its footprint in India with Horlicks, after having fought off competition from rival Nestlé and Coca-Cola for the popular hot malted beverage.

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's other brands in the HFD basket include Maltova and Viva, which will now be a part of the merged entity.

The merger of GSK Consumer with HUL will be on a basis of a share swap ratio of 4.39 HUL shares for each GSK Consumer share, implying a total equity value of Rs 31,700 crore for 100 per cent of the latterOnce the new HUL shares are issued, Unilever's holding in HUL will be diluted from 67.2 per cent to 61.9 per cent, the company said.

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. HUL's share price was up Rs 720 or 4.12% to close at Rs 1,826.

Shares in HUL rose as much as 2.8 per cent to touch an intraday high of Rs 1,802.90 apiece on the NSE, whose benchmark index Nifty was flat in afternoon. With penetration of health food drinks still low at around 24%, Horlicks would benefit from HUL's distribution muscle and its 8 million outlet reach to grow under a new parent. "We look forward to welcoming new brands and great talent into the Unilever and HUL family, once the transaction is complete", says Sanjiv Mehta, chairman and managing director, HUL. HUL's top management said it will unlock significant synergies from the merger both from revenue and costs. It could, however, lead to certain redundancies.

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