Glaxo to merge with HUL; takes over Horlicks

05 December, 2018, 15:18 | Author: Kara Nash
  • Horlicks products

On Monday, HUL announced that GlaxoSmithKline Consumer Healthcare (GSK CH) would be merged with the company in an all-equity deal worth ₹31,700 crore that would give the former access to strong Health Foods Drink (HFD) brands Horlicks and Boost, alongwith Maltova and Viva. Speaking of which Horlicks has been touted as the market leader in the malt-based beverages segment with a share of 43 per cent, followed by Mondelez International's Bournvita, that holds about 13 per cent of the market.

The second-biggest deal by value in the consumer goods space is that of Diageo picking up majority stake in United Spirits. The transaction is an all-equity merger with 4.39 shares of HUL being allotted for every share in GSK Consumer. GSK's health food portfolio includes popular brands Horlicks and Boost.

Hindustan Unilever Chairman and Managing Director Sanjiv Mehta said the turnover of the company's foods and refreshment business will cross Rs 10,000 crore after the merger, according to PTI.

Unilever will also buy GSK's business in India's neighboring country Bangladesh as well as nutrition brand rights for "certain other territories" at a price tag of £566 million ($723 million).

The deal covers India, Bangladesh and 20 other markets: predominantly in Asia but also covering Australia, New Zealand, Kenya, the Maldives and the Middle East.

"We will become one of the largest F&R businesses in the country", Mehta added. HUL is well positioned to further develop the market given the extent of its reach and capabilities, the company said. The merger values GSK Consumer Healthcare India at ₹31,700 crore, or ₹7,540 per share. But Unilever says the category is still "under-penetrated" in India and has the opportunity to grow. Cost synergies are expected from a combination of supply chain efficiencies and operational improvements, go-to-market and distribution network optimisation, the benefits of scale in a number of cost areas such as marketing, and streamlining of overlapping infrastructure. 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 transaction is expected to be completed in one year, subject to shareholder and regulatory approvals. We believe Unilever is well placed to maximise its future potential.



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