Hindustan Unilever and GlaxoSmithKline’s domestic consumer unit are merging in what is said to be India’s largest consumer goods deal ever

• Hindustan Unilever Ltd (HUL), the Indian subsidiary of consumer goods giant Unilever, has agreed to acquire GlaxoSmithKline’s (GSK) key consumer nutrition brands in India including Horlicks, Maltova and Boost.
  
• The deal, which is valued at ₹317 billion, will see HUL take over GSK’s consumer healthcare operations and merge them with itself.
  
• In exchange, GSK will get a 5.7% stake in HUL, which is valued at ₹230 billion, and hence, become the second-largest shareholder in the company.
  
• Once the deal is completed at the end of 2019, HUL is expected to become India’s largest publicly-listed food and refreshments company.
  

After months of speculation and backroom meetings, Hindustan Unilever Ltd (HUL), the Indian subsidiary of consumer good giant Unilever, announced on 3 December that it had agreed to acquire GlaxoSmithKline’s (GSK) key consumer nutrition brands in India in what is said to be India’s largest consumer goods deal ever.

The all-stock deal, which is valued at ₹317 billion ($4.5 billion), will see HUL take over GSK’s consumer healthcare operations and merge them with itself. Its offer to exchange 4.39 of its shares for every one share in GSK’s subsidiary reportedly beat out all-cash bids from the likes of Nestle, ITC and Coca Cola.

The businesses being divested, which include health drinks Horlicks, Maltova and Boost, brought in a total of £406 million (₹36.4 billion) in sales in the nine months ended September 2018. Interestingly, the 140-year old Horlicks will be owned by HUL’s parent company, Unilever, and it will have to pay royalties on sales.

The acquisition also includes GSK’s 82% holding in its Bangladesh unit as well as branding rights to products in various other markets. HUL will also distribute GSK’s over-the-counter and oral healthcare products like Crocin and Sensodyne for a period of five years as part of a preliminary move into the pharmaceuticals space.

In exchange, GSK will get a 5.7% stake in HUL, which is valued at ₹230 billion, and hence, become the second-largest shareholder in the company. However, after the deal is completed at the end of 2019, by which time HUL will be India’s largest publicly-listed food and refreshments company, GSK plans to sell its stake in HUL in what is expected to be a very profitable cash-out.

The deal is likely to shake up India’s consumer food goods sector and add pressure on HUL’s rivals in the FMCG space as it upgrades GSK’s brands and uses its widespread distribution network of nearly eight million outlets to maximise sales, especially in rural areas. The company already owns a number of prominent brands like Lipton, Kissan, Knorr and Magnum.

SEE ALSO:

Here are the top 10 acquisitions to have happened in India

After the Walmart acquisition, here’s what’s in store from Flipkart