Unilever makes $5.4b bet on India

Anglo-Dutch consumer goods giant Unilever Plc, the parent company of Hindustan Unilever Ltd (HUL) on Tuesday said that it would make a voluntary open offer to the shareholders of its Indian subsidiary for acquiring an additional 22.5 per cent stake for `600 per share.

In a release issued at both London and Mumbai, Unilever said that it would spend a total of $5.4 billion (`29,220 crore) for increasing its stake.

The parent company currently holds 52.48 per cent stake in HUL and if the offer goes through, Unilever’s total stake would increase to 75 per cent.

The offer signals Unile- ver’s shift in global strategy to focus on the fast growing emerging market economies amidst a slowdown in Europe and the United States.

The offer price commands a premium of 20.5 per cent to the share’s closing price of `497.60 on Monday.

Following the announcement, the share price of HUL skyrocketed 17.28 per cent on the Bombay Stock Exchange (BSE) to end the day at `583.60.

“This represents a further step in Unilever’s strategy to invest in emerging markets and offers a liquidity opportunity at what we believe to be an attractive premium for existing shareholders,” said Paul Polman, CEO, Unilever.

Mr Polman added that the long heritage and great brands of Hindustan Unilever, and the signifi- cant growth potential of a country with 1.3 billion people makes India a strategic long-term priority for the business.

The offer period is expected to begin in June 2013 subject to necessary regulatory approvals.

“This is actually a strategic move by Unilever betting on India’s long term growth story,” observed Jagannadham Thunuguntla, head of equity, SMC Global Securities.

Though the offer price of `600 per share is attractive from a shareholder’s point of view, Mr Thunuguntla however pointed out that many shareholders would not be willing to tender their shares in the open offer, as HUL is a high growth company among the listed universe.