HUL settles at record high, GSK Consumer up 4% after board approves merger

Shares of Hindustan Unilever (HUL) and GlaxoSmithKline Consumer Healthcare (GSKCH) moved higher by up to 6% on the BSE in intra-day trade, after their respective boards approved their merger, subject to obtaining requisite approvals from statutory authorities and shareholders.

HUL settled 4.1% higher at Rs 1826 on the BSE. It had hit a new high of Rs 1,839 in intra-day trade, rising 4.9%, surpassing its previous high of Rs 1,808 touched on August 20, 2018, on the BSE in intra-day trade.

GSKCH rose 3.75% to settle at Rs 7543 on the BSE. It rallied as much as 5.7% to Rs 7,687 in intra-day, bouncing back by 8.4% from its day’s low level of Rs 7,090 before the announcement.

The merger of GSKCH India with HUL will be on a basis of an exchange ratio of 4.39 HUL shares for each GSKCH India share, implying a total equity value of Rs 317 billion for 100% of GSKCH India. Following the issue of new HUL shares, Unilever‘s holding in HUL will be diluted from 67.2% to 61.9%," HUL said in a regulatory filing. 

The merger includes the totality of operations within GSKCH India, including a consignment selling contract to distribute GSKCH India’s over-the-counter and oral health products in India, it added. READ MORE HERE

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.

HUL said it will increase penetration with a special focus on rural markets and emerging channels and expand our offerings to the fast-growing premium segment.

The company 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. It expects the business to grow in double-digits in the medium-term and margins to be accretive to HUL post realisation of synergy benefits.