Published: Wed, December 05, 2018
Health Care | By Oscar Goodwin

Unilever buys GSK’s Indian Horlicks business for £3.3 billion

Unilever buys GSK’s Indian Horlicks business for £3.3 billion

FMCG major Hindustan Unilever Limited (HUL) today said that it has a scheme of amalgamation with health foods maker GlaxoSmithKline Consumer Healthcare Limited (GSK CH India).

Unilever has won its bid to snap up GSK's malted milk drink Horlicks, after announcing a deal to buy the brand as well as Glaxo's entire health drinks portfolio in Asia for £3.1bn. Shares in Hindustan Unilever rose 4.1 percent on Monday to a record, while GlaxoSmithKline Consumer Healthcare Ltd. added 2.8 percent to its highest level since September 21.

Unilever head of food and refreshment Nitin Paranjpe said: "We are delighted to be acquiring the GSK health food drinks portfolio". Nearly 90 per cent of the turnover is in India.

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HUL chairman and CEO Sanjiv Mehta said with the strategic merger the company will be expanding its portfolio through "great brands into a new category catering to the nutritional needs of our consumers". Horlicks products have been an everyday staple in South Asian households across generations.

GSK CH India is the market leader in the HFD category, with brands such as Horlicks and Boost.

"The iconic Horlicks brand has a deep heritage, credibility and resonance around the world". The turnover of our F&R (food and refreshment) business will exceed Rs.100 billion (Rs 10,000 crore) and we will become one of the largest F&R businesses in the country. Improving the health and well-being of one billion people by 2020 is a key pillar in our Unilever Sustainable Living Plan.

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Deal may take a year to complete given regulatory/shareholder approvals but it should be EPS accretive from day 1 Even without synergy benefits, the merger is EPS accretive for HUL to the extent of ~3.7% on FY21 earnings estimates HUL may have to pay parent a royalty from Horlicks brand sales.

Mehta further said that this merger would create remarkable shareholder value through both cost synergies and revenue growth.

Additionally, HUL will also distribute GSK's over-the-counter (OTC) and oral health products under a consignment selling agreement for five years. The other brands covered by the deal are drinks Viva and Maltova. The GSK CH India business delivered total turnover of around Rs 4,200 crore in the year ended March 2018 and a large chunk of it, nearly 95 per cent of its, came from Horlicks and Boost brands. The scale of Unilever's India business-which is also its fastest growing-appears to have dimmed the chances of other suitors in the fray. We believe Unilever is well placed to maximise its future potential.

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