Unilever to acquire Horlicks and GSK’s nutrition business for US$3.8b

INDIA – The global consumer goods leader, Unilever has agreed to acquire malted drinks brand, Horlicks and other GlaxoSmithKline’s Indian consumer healthcare products in a transaction worth US$3.8 billion (3.3 billion Euros).

The transaction will also see Hindustan Unilever (HUL), Unilever’s operating arm and India’s largest consumer goods company merge its operations with GlaxoSmithKline Consumer business.

The announcement marks an end to a competitive race in which Unilever has prevailed over its rival Nestle as well Coca-Cola who had earlier shown a strong interest in Horlicks stake.

According to Unilever, the transaction forms part of its strategy of increasing its presence in health-food categories and in high-growth emerging markets.

The merger of HUL with GSK CH India includes a total equity value or 100% of GSK CH India and contract to distribute its over-the-counter (OTC) and oral care brands such as Sensodyne, Eno and Crocin.

It also includes an 82% stake in Glaxo’s Bangladesh unit and other related consumer health brands outside India.

Following the closure of the deal, GSK will own approximately 5.7% of HUL, which the British drug maker intends to sell down in tranches.

“With this proposed strategic merger with GSKCH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers,” said HUL chairman Sanjiv Mehta.

“The turnover of our food and refreshment business will exceed US$1.42 billion and we will become one of the largest F&R businesses in the country.”

It is one of the largest transactions in India’s consumer goods sector, boosting Unilever’s footprint in a market identified to be the fastest growing economies in the world.

In addition to Horlick’s, Unilever will gain the Boost brand, all set to compete in India’s malt-based hot drinks segment, which is estimated at US$1.1 billion, according to Euromonitor.

Horlicks is said to be the market leader in the malt-based beverages segment with 43% market share followed by Mondelez International’s Bournvita, which has around 13% share.

In 2018, the GSK consumer business portfolio delivered total turnover of US$623.48 million, primarily through the Horlicks and Boost brands and almost 90% of the turnover is in India.

“We are delighted to be acquiring the GSK Health Food Drinks portfolio.

The iconic Horlicks brand has a deep heritage, credibility and resonance around the world.

The acquisition is transformative for our Foods and Refreshment business allowing us to enter the Health Foods Drinks category, further strengthening our position in health and wellness,” said Nitin Paranjpe, President, Food & Refreshment, Unilever.

“It is rare to be able to acquire brands with such leading market positions and fantastic consumer equity in one of the world’s most exciting and fast-growing markets.

Improving the health and wellbeing of 1 billion people by 2020 is a key pillar in our Unilever Sustainable Living Plan.

Horlicks and Boost will add to our stable of purpose driven brands that help consumers to get more out of their lives.”

The market is also dominated by specialised products made by nutraceuticals companies like Abbott and Danone with common brands such as Ensure, Pediasure and Protinex.

With the transaction, Unilever is seeking to strengthen its presence in the emerging markets that account for about two-thirds of its revenue.

Analysts say healthier segments such as malt beverages, cornflakes, oats hold the potential to grow against biscuits, salty snacks and aerated drinks that together is nearly US$10.6 billion in size.

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