Nestle nearing deal to acquire GSK’s consumer healthcare business in India

INDIA – The Swiss transnational food and drink company, Nestle SA is said to have tipped Unilever, another serious bidder in the race for GSK Consumer Healthcare business in India, ET Retail reports citing sources familiar with the matter.

The deal which highlights popular malt food drink brand Horlicks, will see Nestle strike the biggest M&As in the Indian consumer products industry at a transaction pegged at about US$3 billion.

GSK which owns 72.5% in the local subsidiary, is looking to sell its consumer nutrition business consisting of Horlicks and Boost Brands to help fund its US$13 billion buyout of the Novartis stake in their consumer healthcare joint venture.

The people said to be familiar with the matter said that Nestle, which boasts of being the world’s largest food company is at the verge of garnering the GSK stake, with the announcement expected to be made soon.

Earlier, ET Retail reported that Nestle and the British-Dutch transnational consumer goods company Unilever were the only two companies in the final race to ink the Horlicks deal.

The report further indicated that Nestle was the frontrunner with a more aggressive offer after Coca-Cola, the third contender selected for the protracted due diligence process opted out.

A GSK Consumer Healthcare spokesperson stated, “We are conducting a strategic review and expect to conclude that by year-end.”

In the past, when asked about the proposed Horlicks acquisition, Nestlé’s CEO Ulf Mark Schneider had commented that, while his company pursues prudent acquisitions, it is equally keen on pursuing organic growth.

However, one of the sources said the GSK management view had favoured the Unilever bid from the perspective of synergies.

Consolidation drive

India’s consumer goods segment is significantly gaining traction from global industry players with some of them referring to it as global growth market.

After announcing a strategic review of its nutritional businesses in March this year, GSK maintained that India remains a priority market and that the consumer healthcare business will continue to invest in growth opportunities for its OTC and oral health brands, such as Sensodyne and Eno.

Since it was announced early this year, the strategic sale attracted other bidders such as Coca-Cola, ITC, PepsiCo and Reckitt Benckiser, and private equity fund KKR.

In a consolidation drive towards sustaining business growth, Kraft Heinz, sold its Complan and Glucon-D to Zydus Wellness for US$628 million last month.

For Nestle, the Horlicks addition strengthens its niche in the health food drinks market estimated at US$849 million, giving it a leadership position in the segment.

Nestle already has a significant share of the market in the segment with its Milo brand, and the deal complements its ambition of becoming the global leader in the health and nutrition segment.

Horlicks has a value market share of around 44% and is a leader in the milk food drinks market.

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