Unilever to buy Horlicks, other products for 3.3 bn euros in HUL-GSK merger

Multinational consumer goods major Unilever on Monday confirmed it was acquiring Horlicks and other health food products in an all-equity merger of Hindustan Unilever Ltd (HUL) with publicly listed GSK consumer Healthcare India.

The merger of HUL with GSK Consumer Health will be on the basis of an exchange ratio of 4.39 HUL shares for each GSK Consumer Health share. The deal also includes the acquisition of certain other commercial operations and assets outside of India.

Unilever announced the acquisition of an 82 per cent stake in GSK Bangladesh as well. It will also buy commercial operations of GSK in 20 other predominantly Asian markets and intellectual property rights for 470 million euros in cash utilising HUL equity to fund Indian component of the transaction.

HUL CMD Sanjiv Mehta said in a statement, “With this proposed strategic merger with GSK Consumer Healthcare India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers. The turnover of our F&R (food and refreshment) business will exceed Rs 100 billion and we will become one of the largest F&R businesses in the country.”

Unilever's share of the total GSK Consumer Health deal consideration is 3.3 billion euros, payable using cash, and shares in its listed India subsidiary HUL. The deal is aligned with Unilever's stated strategy of increasing its presence in health-food categories and in high-growth emerging markets, and it expects substantial synergies between the merging entities.

Cost synergies are expected from a combination of supply chain efficiencies and operational improvements and implies a total equity value of Rs 317 billion for 100 per cent of GSK Consumer Health.

The deal is expected to be completed in 12 months. Hindustan Unilever CEO Sanjiv Mehta said the turnover of foods & refreshments business would now exceed Rs 100 billion.

The total consideration for the deal is 4.6 billion euros, of which Unilever's implied contribution is through cash and the issue of shares in HUL. Following the issue of new HUL shares, Unilever's holding in HUL will be diluted from 67.2 per cent to 61.9 per cent.

The transaction will be EPS-accretive (earnings per share-accretive), on an underlying basis, immediately after completion.