Medical

Horlicks finds new home as Unilever buys GSK’s consumer nutrition business

Horlicks finds new home as Unilever buys GSK’s consumer nutrition business

Anglo-Dutch consumer goods giant Unilever has emerged as the victor in the fight to acquire the India-based Horlicks bedtime malt drink brand and other nutrition products from GlaxoSmithKline (GSK), confirming a EUR3.3bn (US$3.74bn) deal.

Malted milk drink Horlicks has been positioned as a nutritional product for children in India, where it has dominated the market for years.

The second-biggest deal by value in the consumer goods space is that of Diageo picking up majority stake in United Spirits.

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.

As per a definite agreement reached by HUL with GSK CH India, 4.39 shares of HUL will be allotted for every share in GSK CH India. The iconic malted milk drink brand Horlicks, which is now owned by GSK Plc, is also being acquired by HUL's Anglo-Dutch parent Unilever. HUL's top management said it will unlock significant synergies from the merger both from revenue and costs.




Commenting on the merger, Sanjiv Mehta, Chairman and Managing Director, Hindustan Unilever said: "The turnover of our F&R (food and refreshment) business will exceed Rs 100 billion (10,000 crore ) and we will become one of the largest F&R businesses in the country".

According to a company statement, Unilever's Indian arm Hindustan Unilever will acquire GlaxoSmithKline Consumer Healthcare in an all-stock merger. This portfolio has a long history in India with Horlicks having originally been introduced in the 1930s.

The F&R's average growth rate has been in the double digits over the last decade, and the category still remains under-penetrated in India. HUL now looks to strengthen its position in the rest of the market that is growing at 17 percent, he said.

Under the all-share deal, GSKCH will be merged with Unilever's subsidiary, Hindustan Unilever (HUL), in such a way that a GSKCH shareholder would get 4.39 shares of HUL for each share of GSKCH that he/she holds. This will come about from a combination of supply chain efficiencies, operational improvements, go-to-market and distribution network optimization and streamlining of overlapping infrastructure.

Post synergies, the implied EV/EBITDA multiple for the transaction would be below 20 times. The other brands covered by the deal are drinks Viva and Maltova. The transaction is expected to be completed in one year, subject to shareholder and regulatory approvals.


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