FMCG major Hindustan Unilever Limited (HUL) on Monday said it will buy GlaxoSmithKline's Indian Horlicks nutrition business for around $3.8 billion, boosting the consumer goods group's position in a key emerging market.
The transaction is an all-equity merger with 4.39 shares of HUL being allotted for every share in GSKCH India, which sells consumer healthcare products, including popular drink brand Horlicks.
The deal, announced on Monday, marks a further step by drugmaker GSK to streamline its business and follows a competitive auction in which Unilever saw off rival Nestle, as well as earlier interest from Coca-Cola.
The transaction covers GSK's health food and drinks portfolio in India, Bangladesh and 20 other predominantly Asian markets. The main asset being sold is GSK's 72.5 percent stake in Indian-listed GlaxoSmithKline Consumer Healthcare.
GSK said its net proceeds from the deal, after tax and hedging costs, were expected to be around 2.4 billion pounds
Following the closure of the deal, GSK will own approximately 5.7 percent of HUL, which the British drugmaker intends to sell down in tranches.
Following the announcement of the deal GlaxoSmithKline Consumer Healthcare Ltd climbed 6.1 percent to its highest since 21 September, while Hindustan Unilever Ltd rose 4.8 percent to record high.
"HUL has reached a definite agreement with GSKCH India in this regard," the company said in a statement.
Commenting on the development, HUL CMD Sanjiv Mehta, Chairman and Managing Director said: "With this proposed strategic merger with GSKCH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers."
Post the acquisition, he said the turnover of the company's Foods and Refreshment (F&R) business will exceed Rs 10,000 crore.
"We will become one of the largest F&R businesses in the country," Mehta added.
The GSKCH India business delivered a total turnover of around Rs 4,200 crore in the year ended March 2018, primarily through its Horlicks and Boost brands, the statement said.
The merger of GSKCH India with HUL will be on a basis of an exchange ratio of 4.39 HUL shares for each GSKCH India Share, implying a total equity value of Rs 31,700 crore for 100 percent of GSKCH India, it said
Following the issue of new HUL shares, Unilever's holding in HUL will be diluted from 67.2 percent to 61.9 percent, it added.
The merger includes the totality of operations within GSKCH India, including a consignment selling contract to distribute GSKCH India's over-the-counter and oral health products in India.