Consumer goods giant agrees beverage deal

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The £3.1-billion deal includes the merger of GSK Consumer Healthcare (GSK India) with Hindustan Unilever (HUL), following which the FTSE 100 pharmco will own approximately 5.7 percent of HUL.

Unilever will pay EUR3.3bn using a combination of cash and shares in HUL.

Although Horlicks brand in England is 140 years old and in the deal with HUL, the company's business in England will not be affected. Nearly 90% of this is in India. Horlicks, a malted milk hot drink, was introduced to India in the 1930s and has since become an "everyday staple" in South Asian households.

GSK said India remained an important market for it and the company will continue to invest in growth opportunities for its OTC and Oral Health brands there, which include Crocin, Eno and Sensodyne. Despite this, the category still had more potential in the region and Unilever said it was well-placed to develop the market, given its reach and capabilities.

Nestle and CocaCola were also in the race to acquire GSK's health food portfolio. A leader in the malt-based beverages segment, Horlicks holds 43 per cent market share followed by Mondelez International's Bournvita, which has around 13 per cent share.

The deal, announced on Monday, increases the consumer goods giant's footprint in one the world's fastest-growing economies and marks a notable addition to the portfolio by outgoing Chief Executive Paul Polman, who steps down in January. 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 purpose-driven brands that help consumers to get more out of their lives", Paranjpe said.

Post the acquisition, he said the turnover of the company's Foods and Refreshment (F&R) business will exceed Rs 10,000 crore.

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Mehta further said that this merger would create remarkable shareholder value through both cost synergies and revenue growth.

"With this strategic merger with GSK CH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers". The merger with HUL values the total business of GSK Consumer Healthcare at Rs 31,700 crore. The main asset being sold is GSK's 72.5 percent stake in Indian-listed GlaxoSmithKline Consumer Healthcare. Following the issue of new HUL shares, Unilever's shareholding in the merged entity will come down to 61.9 per cent against 67.2 per cent prior to the merger.

Unilever is boosting its presence in India by buying some of the country's top nutritional drinks.

It will fund the acquisition largely through shares of its listed India subsidiary Hindustan Unilever and limit the cash outlay to about €639 million.

The deal entails multiple transactions.

Following completion of the transaction, which is expected by the end of 2019, GSK intends to sell down its holding in HUL.