Boards of GSK India, HUL approve merger proposal

On December 03, Hindustan Unilever Limited (HUL)— an India-based fast moving consumer goods company— announced its board’s approval on its merger with GlaxoSmithKline Consumer Healthcare (GSKCH India)— one of the largest players in the Health Food Drinks industry in India—through an-all equity deal, valuing the total business of the latter at Rs 31,700 crore.

Also, GSK said, “The transaction is conditional on the approval of the merger by the shareholders and creditors of each of GSK India and HUL. The Boards of GSK India and HUL have both approved the merger. Both GSK and Unilever, who hold 72.5 % and 67.2% of the shares in GSK India and HUL respectively, intend to vote in favor of the merger.”

HUL, however, stated that the acquisition is subject to obtaining requisite approvals from statutory authorities and shareholders.

In this regard, GSK added, “The transaction is also subject to certain other conditions including the receipt of anti-trust clearances in India, the approval of the merger by the relevant National Company Law Tribunals, and certain other customary closing conditions... Proceeds will be used to support the Group’s strategic priorities and reduce debt and the transaction is expected to be neutral to earnings.”

Notably, this transaction is an all-equity merger with 4.39 shares of HUL being allotted for every share in GSKCH India.

HUL then said, “HUL has reached a definite agreement with GSKCH India in this regard.” Thereafter, HUL’s Chairman and Managing Director Sanjiv Mehta said, “With this proposed strategic merger with GSKCH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers.”

According to Mehta, post the acquisition, the turnover of HUL’s Foods and Refreshment (F&R) business will exceed Rs 10,000 crore. He added, “We will become one of the largest F&R businesses in the country.”

With regard to this transaction, GSK issued a Press Release on its website stating: “Following the completion of its previously announced strategic review, GlaxoSmithKline plc announces the divestment of Horlicks and other consumer healthcare nutrition brands to Unilever plc (“Unilever”) and the merger of GSK Consumer Healthcare Limited (“GSK India”) with Hindustan Unilever Limited (“HUL”) for a total consideration valued at approximately £3.1 billion based on the 15-day volume weighted average price (VWAP) ending November 30, 2018 of HUL shares of INR 1,717. Net proceeds are estimated to be approximately £2.4 billion on the same basis.”

Notably, in India, Horlicks and other nutrition products are sold by GSK India, in which GSK holds a 72.5% stake.

As per the Release, the proposed transaction involves the merger of GSK India with HUL, following which GSK will own approximately 5.7% of HUL. Following completion of the transaction, GSK intends to sell down its holding in HUL in tranches.

The Release further added that GSK is to sell its 82% stake in GlaxoSmithKline Bangladesh Limited and other related brand rights for GSK’s consumer healthcare nutrition activities in certain other territories to Unilever, for which it is expected to receive cash proceeds equivalent to £566 million.

Subsequently, the Release stated, “India remains an important market for GSK and the company will continue to invest in growth opportunities for its OTC and Oral Health brands there, which include Crocin, Eno, and Sensodyne. Following completion of the transaction, HUL will distribute GSK’s OTC and Oral Health brands, which are currently distributed by GSK India. This arrangement will be for a period of 5 years.”

In this regard, GSK’s CEO Emma Walmsley said, “Horlicks has made a significant contribution to GSK and to the health of consumers across India for many decades and we believe Unilever is well placed to maximize its future potential. Proceeds from this transaction will be used to support the Group’s strategic priorities, including investing in our pharmaceutical business.”