GSK To Sell Select Consumer Healthcare Nutrition Products to Unilever in $3.9-Billion Deal
Following a previously announced strategic review, GlaxoSmithKline (GSK) has agreed to sell the Horlicks brand, its malted milk drink, and its other consumer healthcare nutrition brands to Unilever, a London, UK-based consumer goods company. As part of the transaction, GSK has also announced the merger of GSK Consumer Healthcare (GSK India) with Hindustan Unilever (HUL), Unilever’s India-based subsidiary, for a total consideration valued at approximately £3.1 billion ($3.9 billion).
GSK announced plans to sell its Horlicks brand in the UK and proposed to close the associated manufacturing site in Slough, UK, where UK product is made. In addition, GSK said it intended to sell the MaxiNutrition brand, consisting of sport nutrition products. The combined annual UK sales of Horlicks and MaxiNutrition are approximately £30 million ($39 million).
In India, Horlicks and other nutrition products are sold by GSK India, a public company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), in which GSK holds a 72.5% stake. The proposed transaction involves the merger of GSK India with HUL, a public company listed on the NSE and BSE, after which GSK would own approximately 5.7% of HUL. The merger values GSK India at 317 billion rupees ($4.4 billion) in total. Following completion of the transaction, currently expected by the end of 2019, GSK intends to sell down its holding in HUL. GSK says that such sell-downs will be in tranches and at such times as GSK considers appropriate, taking into account market conditions.
In addition, GSK plans to sell its 82% stake in GlaxoSmithKline Bangladesh Limited and other related brand rights for GSK’s consumer healthcare nutrition activities in certain other territories to Unilever, for which it is expected to receive cash proceeds equivalent to £566 million ($720 million).
GSK says India remains an important market for the company, and it will continue to invest in growth opportunities for its OTC (over-the-counter) and oral health brands there, which include Crocin, Eno and Sensodyne. Following completion of the transaction, HUL will distribute GSK’s OTC and oral health brands, that are currently distributed by GSK India. This arrangement will be for a period of five years. HUL has a distribution reaching over seven million outlets across India, according to information from GSK.
The transaction is conditional on the approval of the merger by the shareholders and creditors of each of GSK India and HUL. The Boards of GSK India and HUL have both approved the merger. Both GSK and Unilever, who hold 72.5 % and 67.2% of the shares in GSK India and HUL, respectively, intend to vote in favor of the merger, according to information from GSK.
The transaction is also subject to certain other conditions, including the receipt of antitrust clearances in India, the approval of the merger by the relevant National Company Law Tribunals and certain other customary closing conditions.
Proceeds will be used to support the group’s strategic priorities and reduce debt and the transaction is expected to be neutral to earnings. The businesses being divested had in the nine months to September 30, 2018 sales of £406 million ($516 million) and contributed an operating profit margin percentage in the low 20s.