GSK Pharma launches open offer for India arm

To raise stake to 75 per cent from 50.7 per cent in Rs 6,400-cr deal

British pharmaceutical, biologics, vaccine and consumer healthcare group, GlaxoSmithKline Plc, has initiated an open offer to increase stake in its publicly listed subsidiary in India, GlaxoSmithKline Pharmaceuticals Ltd. GSK plans to increase stake in its Indian subsidiary from 50.7 per cent to up to 75 per cent, in a move that underlines multinational companies’ confidence in the domestic pharma and healthcare sector.

This comes within months of Anglo-Dutch consumer goods major Unilever Plc going for an open offer to increase its stake to 67.28 per cent in Indian arm Hindustan Unilever Ltd. GlaxoSmithKline Pharma’s UK parent is offering Rs 3,100 a share, a premium of 26 per cent. The potential total value of the transaction at the offer price is approximately Rs 6,400 crore (£629 million). The current market cap of the company is Rs 24,795 crore.

In February, GSK Plc had increased stake in its publicly listed Indian consumer healthcare subsidiary, GlaxoSmithKline Consumer Healthcare Ltd, to 72.5 per cent from 43.2 per cent, for $901 million. The offer for GSK Pharma Ltd, to acquire up to 20.6 million shares, represents 24.3 per cent of the total outstanding shares of the Indian company. (GREATER CONTROL)

The offer is a premium of approximately 26 per cent to the company’s closing share price on the National Stock Exchange on December 13. That closing price was an appreciation of 19 per cent over the last 12 months, said a company statement. Following the announcement, GSK Pharma shares rose 18.6 per cent or Rs 459 on Monday to close at Rs 2,927 on the BSE.

David Redfern, chief strategy officer, GSK said, “For GSK, this transaction will increase exposure to a strategically important market and for our Indian pharmaceutical subsidiary’s shareholders we believe it offers a good liquidity opportunity at an attractive premium.”

“Though there are regulatory challenges, India has strong fundamentals and there are substantial volume opportunities here. We keep launching products from our global vaccine portfolio here and will look for organic growth in future,” he told Business Standard. However, he has ruled out acquiring any other domestic company in India in the near future.  

In November, while reiterating its commitment to India, GSK had announced plans to build a new pharmaceutical manufacturing facility in India at an investment of Rs 864 crore (£85 million).

Sunil Sanghai, head, Global Banking, HSBC India, managing the open offer, said, "The stake enhancement transaction signifies GSK's long-term commitment to India. The fact that they have committed to invest up to $2billion in a year between the consumer company and the pharma company put together shows their positive sentiment towards the long-term growth story of India. In the last couple of years, some other multinationals have also shown a similar commitment, which clearly indicates a positive long-term outlook for the country."

GSK’s Indian pharmaceutical subsidiary manufactures and markets pharmaceuticals and vaccines across multiple therapeutic areas, including respiratory, cardiovascular, oncology, anti-infectives and dermatology. The company employs more than 5,000 people across its operations and generated more than Rs 2,600 crore in turnover in the financial year ended December 31, 2012.

"Securities regulations in India require a minimum public shareholding of 25 per cent for a company to maintain public listing in the country. GSK intends to keep the company publicly listed," the statement said.

Sarabjit Kour Nangra of Angel Broking said, "The buying back of shares is at an attractive price, much above the current market price, and is a strong indicator from the management about the listed entity." This is especially so as the development comes after a recent investment plan announced by the company to further its growth prospects in the Indian pharmaceutical market.