It will buy GSK's health food drinks portfolio in India, Bangladesh and 20 other mainly Asian markets, the companies said this morning.
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. Following the issue of new HUL shares, Unilever's holding in HUL will be diluted from 67.2 per cent to 61.9 per cent. Nearly 90% of this is in India. Its product portfolio, with a long history in India, is supported by strong nutritional claims.
The deal offers Unilever a unique market position in the health food business."The iconic Horlicks brand has a deep heritage, credibility and resonance around the world".
Deal may take a year to complete given regulatory/shareholder approvals but it should be EPS accretive from day 1 Even without synergy benefits, the merger is EPS accretive for HUL to the extent of ~3.7% on FY21 earnings estimates HUL may have to pay parent a royalty from Horlicks brand sales. The transaction is an all-equity merger, with 4.39 shares of Hindustan Unilever to be allotted for every share in GSK India. "I'm confident that this merger will create significant shareholder value through both revenue growth and cost synergies", HUL CMD Sanjiv Mehta said in a statement.
It also includes acquisition of certain other commercial operations and assets outside India, it added.
HUL, in a stock-market disclosure on Monday, announced that its board has approved a scheme of merger with GSK Consumer Healthcare India.
"We will become one of the largest F&R businesses in the country", Mehta added. However, brands like Boost, Viva and Maltova will remain with the merged entity. "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. We believe Unilever is well placed to maximise its future potential.