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

Unilever invests in India with €3.3bn deal for GlaxoSmithKline's Horlicks

The deal values the total business of GSK India at Rs 31,700 crore.

The deal reflects a push by global companies to cash in on India's fast growing economy, including sectors such as retail, consumer goods and technology.

As a part of the agreement, HUL, which makes the Surf detergent, Lux soap and Red Label tea, will merge GlaxoSmithKline Consumer Healthcare, giving it access to health food brands like Boost, Viva and Maltova.

Reportedly, HUL board has approved the scheme of amalgamation with GSK Consumer India, under which the two companies will merge.

The total consideration for the transaction is about 4.6 billion Euro, of which Unilever's implied contribution through both cash and through the issue of shares in HUL, its listed subsidiary in India, totals about 3.3 billion Euro.

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Sold as a bedtime drink in Britain, it was developed into a much bigger brand by GSK in India, although more recently its growth as slowed as urban Indian consumers turn to healthier, less-sugary alternatives.

In a similar context, Citi said that even without the synergy benefits, the merger would add around 3.7% to the EPS, in its FY21 estimates for HUL.

"With this proposed strategic merger with GSK CH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers. 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.

GSK announced in a statement today that it had agreed to divest Horlicks and other consumer healthcare nutrition brands to Unilever. Furthermore, the overall penetration of malt-based drinks is only around 24 per cent. HUL, through its significantly larger distribution network of over 7 million outlets, could further drive penetration, it said. The revenue growth of the HFD portfolio is expected to accelerate through leveraging Unilevers vast local distribution and selling capabilities, particularly in India.

The deal entails multiple transactions. In addition, the transaction will be earnings per share- (EPS) accretive, on an underlying basis, immediately post-completion. Yesterday, it had said it would put together a restructuring team once it gets shareholders' and regulatory approvals. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Unilever Group (the Group). We believe Unilever is well placed to maximise its future potential.

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