Nestle, Kraft Heinz, Unilever and ITC likely suitors for GSK’s Horlicks
NEWDELHI: Global food giants Nestle SA of Switzerland, Chicago-based Kraft Heinz Co., Dutch packaged goods maker Unilever, New Jerseybased Mondelez International Inc., and ITC Ltd are expected to bid for GlaxoSmithKline’s Horlicks and other health nutrition products, according to analysts tracking the sector.
The 145-year-old dietary nutrition brand that accounts for about 85-90% of GSK Consumer Healthcare Ltd’s sales in India could fetch a valuation of 4-4.5 times of sales (going by recent trends) considering the low growth scope of the brand, said Sachin Bobade, an analyst with Mumbai-based Dolat Capital Market. According to GSK statement, its nutrition products portfolio including Horlicks had total sales of $550 million in 2017. However, Reuters estimated the valuation to be around $4 billion, citing unidentified people. The British drug maker on Tuesday said it has initiated a “strategic review” of Horlicks and other nutrition products to support funding of its $13-billion buyout of Novartis’s stake in the global consumer healthcare joint venture formed in 2015.
Besides the Horlicks brand, GSK is exploring sale of its 72.5% stake in Indian subsidiary GSK Consumer Healthcare. “GSK needs the money to support the Novartis deal. Naturally, it would look to conclude the deal in foreign exchange. Global companies, with presence in both India and Malaysia, such as Unilever, Danone and Nestle are the most likely ones to fight for the brand. ITC, which is looking at a bigger presence in dairy, is the only Indian company that could look at buying Horlicks for multiple reasons. While a few others may be interested, they may opt out because of the deal size that could be 2-3 times of sales,” said Sunil Alagh, chairman, SKA Advisors, and former managing director and chief executive officer of biscuit maker Britannia Industries Ltd.