Hindustan Unilever has finally acquired GlaxoSmithKline Consumer Health India for a transaction worth Rs 31,700 crore in the country's largest deal within consumer goods market.
The all-equity merger deal includes an exchange ratio of 4.39 HUL shares for each GSK Consumer India share, along with GSK entire operations of nutrition business and contract to distribute the latter's over-the-counter (OTC) and oral care brands such as Sensodyne, Eno and Crocin.
With this mega deal, HUL will add iconic brands Horlicks and Boost to its product portfolio.
“The acquisition is in line with the Hindustan Unilever strategy to build a sustainable and profitable Foods and Refreshment (F&R) business in India by leveraging the mega trend of health and wellness. GSK CH India is the market leader in the HFD category, with iconic brands such as Horlicks and Boost, and a product portfolio supported by strong nutritional claims,” said the statement by HUL.
HUL said that the company can unlock significant synergies both from revenue and costs through this deal.
“The average growth rate has been double digit over the last decade, and the category still remains under-penetrated in India. HUL is well positioned to further develop the market given the extent of its reach and capabilities. We will increase penetration with special focus on rural markets and emerging channels and expand our offerings to the fast-growing premium segment. Customer development, we believe, will be a growth multiplier given our direct coverage and technology led capabilities. We will drive significant cost synergies from a combination of supply chain efficiencies and operational improvements, go-to-market and distribution network optimisation, scale in a number of cost areas such as marketing and streamlining of overlapping infrastructure. We expect the business to grow in double-digits in the medium-term and margins to be accretive to HUL post realisation of synergy benefits,” it said.
HUL is the number 1 FMCG business in the country with a demonstrated track record of delivering growth which is competitive, profitable, sustainable and responsible. Business has delivered growth of 10% CAGR in the last 10 years with EBIT improvement of 530bps.
Sanjiv Mehta, Chairman and Managing Director, HUL, said, “With this proposed strategic merger with GSK CH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers. I am confident that this merger will create significant shareholder value through both revenue growth and cost synergies. 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. We look forward to welcoming new brands and great talent into the Unilever and HUL family, once the transaction is complete.”
The GSK CH India business delivered total turnover of around INR 42 billion in the year ended March 2018, primarily through its Horlicks and Boost brands.
The merger of GSK CH India with HUL will be on a basis of an exchange ratio of 4.39 HUL shares for each GSK CH India Share, implying a total equity value of INR 317 bln for 100% of GSK CH India. Following the issue of new HUL shares, Unilever‘s holding in HUL will be diluted from 67.2% to 61.9%.
The merger includes the totality of operations within GSK CH India, including a consignment selling contract to distribute GSK CH India’s Over-the-Counter and Oral Health products in India.
The transaction is expected to be completed in one year subject to regulatory and shareholder approvals.