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The acquisition will bolster Unilever's position in a key market.
The acquisition will bolster Unilever's position in a key market.

Unilever in pole position to swallow GDK's Indian Horlicks business

INTERNATIONAL NEWS

By Kane Wu - Nov 29th, 08:42

Unilever has emerged as the leading bidder in a tight contest for GlaxoSmithKline’s Indian Horlicks nutrition business, three people familiar with the situation told Reuters. 

Unilever has emerged as the leading bidder in a tight contest for GlaxoSmithKline’s Indian Horlicks nutrition business, three people familiar with the situation told Reuters.

If it is able to clinch the deal, Unilever will trump fellow European consumer firm Nestlé, the other main contender to buy Horlicks and other GSK consumer healthcare assets in India.

One source said Unilever had been given “preferential treatment” to complete the deal but did not have exclusivity in negotiations, so it was possible GSK might re-open talks with Nestlé if it could not agree terms with Unilever.

The Financial Times reported that Unilever and GSK, which owns 72.5% of Indian business GlaxoSmithKline Consumer Healthcare, were in exclusive talks, citing people familiar with the sales process.

The acquisition would strengthen Unilever’s position in India, an emerging market whose growing population and rising wealth make it attractive in the long term for companies trying to offset weak growth in Western markets.

The GSK business, which includes the popular malt-based drinks Horlicks and Boost, is likely to fetch less than $4bn, said people close to the deal and who declined to be identified as the information is confidential.

Earlier in the sale process, separate sources had told Reuters the business could be valued at more than $4bn.

GSK's listed Indian operation has a market value of $4.22bn, valuing the British drugmaker's stake at around $3.1bn, before any takeover premium.

Some analysts considered the $4bn valuation high considering the Indian market for so-called health drinks — mostly dietary supplements or flavour enhancers typically drunk with milk — is seeing a slowdown in growth.

Bernstein analyst Andrew Wood said recent growth of the GSK business had been disappointing, slowing from 15% to 4% from 2013 to 2017, but it could still be a good fit for Unilever, increasing its already hefty presence in India.

Urban Indian consumers are increasingly turning to healthier, less-sugary alternatives and natural products, analysts and industry sources said.

In October, Kraft Heinz agreed to sell its popular health-drink brands Complan and Glucon-D, along with some other brands and factories, to Indian pharmaceuticals and consumer company Zydus Wellness for 45.95-billion rupees ($648.6m)

Horlicks comfortably dominates the health-drinks market in India and a big consumer company with deep pockets is likely to give it a fresh lease of life, analysts and industry sources said.

GSK is conducting a strategic review of its nutrition brands in India and expects to conclude the process by the end of 2018, a GSK spokesperson told Reuters.

The decision to consider a sale of the business follows GSK's $13bn acquisition of Novartis’s stake in the two groups' consumer health joint venture and a change of strategic priorities under GSK CEO Emma Walmsley.

A spokesperson for Hindustan Unilever, Unilever’s Indian subsidiary, declined to comment when contacted by Reuters. A spokesperson for Nestle India said the company would not comment on “speculation”.

Other bidders earlier in the process included Coca-Cola, which has been looking to expand in emerging markets, sources previously told Reuters.
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