HUL acquires GSK consumer healthcare biz in all-stock deal
Deal values GSK’s consumer health biz at ₹31,700 crore
MUMBAI: India’s largest consumer goods company Hindustan Unilever Ltd (HUL) is set to become the country’s largest listed foods company, powered by a ₹31,700 crore all-stock acquisition of Glaxo-Smith-Kline Consumer Healthcare Ltd that will give the local unit of Unilever brands such as Horlicks, Boost and Viva.
The move would also help HUL make its most ambitious foray into the health and wellness space, chairman Sanjiv Mehta said. In addition, HUL will enter into a five-year contract to distribute GSK Consumer’s overthe-counter and oral health products. “Let’s look at it from a point of a consumer—health, wellness is a big need. If you look at the nutrition deficiencies, it is massive. This squarely fits into that space. From a strategic point of view, it makes immense sense for us to get into this category. It’s a great strategic fit,” Mehta said.
The market for health food drinks in India is estimated at ₹7,000 crore, according to HUL, with Horlicks accounting for around 60% of volume.
“We have very carefully examined their strengths, the claims that we will be able to make, the nutritional properties in the brand, the product, and there is a huge opportunity,” Mehta said. “Its penetration is low, but we are in a business which knows how to do market development. We are a business which knows how to do premiumization.”
The merger is subject to approvals from statutory authorities and shareholders.
This transaction values GSK Consumer at ₹31,700 crore. HUL will issue 4.39 of its own shares for every share of GSK Consumer. Following the issue of new HUL shares, Unilever’s holding in HUL would drop from 67.2% to 61.9%, the company said.
HUL will also market and distribute some brands of GSK Healthcare such as Sensodyne, Otrivin, Crocin and Eno.
“HUL will take on the distribution of all of this under a five-year contract. They get the benefits of what we do with our distribution and reach,” said Srinivas Pathak, chief financial officer, HUL. “For us, it gives us a sense of the pharma channel and a better understanding of that business.”
The company believes that its move to market and distribute GSK Consumer’s products is in line with its own focus on beauty and personal care (BPC) products. “For us, pharmacy is an important channel from BPC perspective,” Mehta said. “There are many brands sold through chemists. Chemists lend credibility to the brands. For us, that is where the benefits will come in. For GSK, it’ll also give them access to the massive reach that we have.”
HUL’s products are available at more than eight million outlets in India. After the merger, the combined revenue of HUL’s food and refreshment business is expected to cross ₹10,000 crore, which would take HUL slightly ahead of Britannia and Nestle, which reported ₹9,830 crore and ₹9,952 crore revenues in 2017-18, respectively. The annual revenue for ITC from its FMCG business stood at ₹11,339.3 crore during the last fiscal. The figures for its food business on a stand-alone basis were not available.