Hindustan Unilever buys GSK Consumer Healthcare in India's largest FMCG deal

HUL plans to merge GSK Consumer with itself in a Rs. 31,700Cr deal

In one of the biggest deals across the consumer goods space, Hindustan Unilever Limited (HUL) on Monday said it will buy GlaxoSmithKline's India business, including the popular Horlicks, Boost and other brands, for around $3.8 billion. GSK has a large play in India, the Anglo-Dutch consumer product major's second largest market.

GSK HFD is the undisputed leader in the Health Food Drinks category in India, with iconic brands such as Horlicks and Boost, and a product portfolio supported by strong nutritional claims. I am confident that this merger will create significant shareholder value through both revenue growth and cost synergies.

"The acquisition is transformative for our foods and refreshment business, allowing us to enter the health food drink category, further strengthening our position in health and wellness". Shares in Hindustan Unilever rose 4.1 percent on Monday to a record, while GlaxoSmithKline Consumer Healthcare Ltd. added 2.8 percent to its highest level since September 21.

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. The transaction covers GSK's health food and drinks portfolio in India, Bangladesh and 20 other predominantly Asian markets. HUL expects that the transaction will take its food and refreshment business to Rs 10,000 crore turnover. GSK said it will sell its holding in HUL and this will be done in tranches, taking into account market conditions.

As part of the deal, GSK India will merge with Unilever's Indian subsidiary, Hindustan Unilever. Following the issue of new HUL shares, Unilever's shareholding in the merged entity will come down to 61.9 per cent against 67.2 per cent prior to the merger.

The board of directors of HUL on Monday approved a scheme of amalgamation and the transaction is expected to be completed in one year subject to regulatory and shareholder approvals.

The maker of Taj Mahal tea is also looking to strengthen its play in the category as it operates only in 15 percent of the market which is heavily penetrated and growing at 9 percent, according to Sitapati. The deal values the total business of GSK India at Rs 31,700 crore. We believe Unilever is well placed to maximise its future potential.

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