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.
While Horlicks will be retained by Unilever Plc, Boost, Viva and Maltova - three other brands in GSK's health food drinks category - will remain with the merged entity.
"We've got to pivot our business to higher growth categories like the kind of stuff we did yesterday (HUL-GSK Consumer merger)", said Sudhir Sitapati, executive director of foods and refreshments business at HUL, at the parent's investor meet in Mumbai.
In 2018, the GSK health food drinks portfolio delivered a total turnover of around EUR550m, primarily through the Horlicks and Boost brands. Nearly 90 per cent of the turnover is in India. Horlicks products have been an everyday staple in south Asian households for generations. With this, the company will expand its footprint in India with Horlicks, after having fought off competition from rival Nestlé and Coca-Cola for the popular hot malted beverage. HUL is well positioned to further develop the market given the extent of its reach and capabilities, the company said.
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Nitin Paranjpe, president of food and refreshment at Unilever, said: "The iconic Horlicks brand has a deep heritage, credibility and resonance around the world". The transaction is expected to be completed in one year subject to regulatory and shareholder approvals. The turnover of our F&R business will exceed Rs 100 bn and we will become one of the largest F&R businesses in the country. The transaction is an all-equity merger with 4.39 shares of HUL being allotted for every share in GSK Consumer.
The deal still needs to be approved by the shareholders of Hindustan Unilever and GSK India, as well as by Indian regulators. The brand accounted for 45% of India's health drink market in 2017, according to consulting firm RedSeer. The scale of Unilever's India business-which is also its fastest growing-appears to have dimmed the chances of other suitors in the fray.
It also includes acquisition of certain other commercial operations and assets outside India, it added.
GSK said it will use the proceeds from the Unilever sale to shore up its other healthcare products in India, including over-the-counter medicines. Upon completion, it could tentatively add Rs 4 to HUL's earnings per share, feels Solanki.