GSK Consumer jumps over 1% on merger with HUL

GSK Consumer jumps over 1% on merger with HUL

GlaxoSmithKline (LON:GSK) has inked a deal to sell its nutrition business to Unilever (LON:ULVR), the companies have said.

Total consideration receivable by GSK is therefore expected to have a value of approximately £3.1 billion where £2.6 billion for merger between GSK India and Hindustan Unilever Limited and £150 million for 82 per cent shares of GSK Bangladesh and £416 million for the sale of brand rights and GSK's consumer healthcare nutrition activities in certain other territories.

With this deal, HUL will now own iconic brands such as Horlicks and Boost. Nearly 90% of the turnover is in India.

Originally introduced in the 1930s, Horlicks products have a long history in India. Horlicks products have been an everyday staple in South Asian households across generations. Improving the health and well-being of one billion people by 2020 is a key pillar in our Unilever Sustainable Living Plan. Horlicks and Boost will add to our stable of objective driven brands that help consumers to get more out of their lives.”. The company's turnover of its food and refreshment business would surpass Rs. 10,000 crore, placing it among the largest F&R businesses in the country.

In a similar context, Citi said that even without the synergy benefits, the merger would add around 3.7% to the EPS, in its FY21 estimates for HUL.

GSK will also offload its 82pc stake in GlaxoSmithKline.

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While fresh shares of HUL will be issued to GSK Plc, it will result in Unilever's shareholding in HUL declining to 61.9 per cent from 67.2 per cent prior to the merger with GSK Consumer Healthcare.

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. 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.

Purportedly, the packaged food and beverages market in India is hugely skewed to aerated drinks, salty snacks and biscuits which is close to Rs. 75,000 crore together.

The two companies have said all employees of GSK Consumer Healthcare will become employees of HUL. "We look forward to welcoming new brands and great talent into the Unilever and HUL family, once the transaction is complete", says Sanjiv Mehta, chairman and managing director, HUL. Furthermore, the overall penetration of malt-based drinks is only around 24 per cent. HUL, through its significantly larger distribution network of over 7 million outlets, could further drive penetration, it said.

The deal entails multiple transactions. "The transaction is subject to the satisfaction or waiver of the conditions precedents in the SPA (including necessary regulatory formalities and approval in accordance with the laws of Bangladesh)".

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