The deal will see Unilever and GSK merge their Indian businesses. Once closed, GSK will hold a 5.7% stake in Hindustan Unilever (HUL).
The transaction strengthens Unilever’s presence in the emerging markets that accounts for about 2/3rds of its revenue. The Dove soap maker will make use of cash and shares from its Indian subsidiary to take control of a new venture, which includes Glaxo’s listed entity in the country.
The acquisition falls in line with Unilever’s strategy to build a sustainable and profitable Food & Refreshment (F&R) business in India, by making full use of the health and wellness trend.
“If you look at Unilever’s foods portfolio in India, they have been seriously lagging for many years now, especially versus the global Unilever portfolio,” stated Anand Shah, an analyst at Axis Capital Ltd., Mumbai to Bloomberg, calling it a “bid to expand the entire food pie to themselves.”
Commenting on the development, Sanjiv Mehta, HUL’s Chairman and Managing Director said in a statement: “With this proposed strategic merger with GSK CH (GSK Consumer Health) India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers.”
After the acquisition is completed, Mehta said the turnover of the company’s Foods and Refreshment (F&R) business will exceed Rs 10,000 crore.
“We will become one of the largest F&R businesses in the country,” Mehta said in the statement.
In the recent past, HUL made a number of acquisitions to diversify its offerings. Most notably, it acquired the ice cream and frozen desserts business of Vijaykant Dairy and Food Products Ltd. in the Indian state of Karnataka.