Unilever may pip Nestle to buy GSK’s India unit

Mumbai, Nov 29: In a fresh turn of events, Magnum ice cream maker Unilever emerged as a stronger contender for GlaxoSmithKline’s $4-billion Indian consumer healthcare business, leaving Milo milk powder marketer Nestle thirsty.
Quoting unnamed sources, global news agencies Reuters and Bloomberg on Wednesday said the Anglo-Dutch multinational was holding talks with GSK to buy out the India business, which includes prized brand Horlicks. Nestle, these reports suggested, had dropped out of the race.
Sources said a few tweaks made by Unilever in its bid appears to have changed the course. Unilever changed its cash-cum-stock offer after Nestle offered an all-cash bid but with no significant premium to prevailing market value. The GSK management, sources said, favoured Unilever’s bid because of better synergies. It is also conjectured that Unilever may have changed the deal structure and offered to distribute GSK’s OTC brands like Eno and Sensodyne.
A Bloomberg report said Nestle dropped the bid, and that Unilever talks with GSK could still fall apart. Agency reports said Unilever has offered to pay around $3 billion for about 70% of the division. Earlier, The Financial Times reported that Unilever had secured exclusive negotiating rights for the GSK unit.
While the companies did not wish to comment, the deal would help Unilever’s 67% owned Indian subsidiary Hindustan Unilever (HUL) gain a strong entry into the malted milk food drinks market, where Horlicks has a leadership position with a share of 43%.
On the other hand, Horlicks, as also Boost, would gain from HUL’s vast distribution reach that extends to over 6.3 million outlets. The Indian arm, GSK Consumer Healthcare (GSKCH), in which GSK has a 72.5% holding, has a direct coverage of 8 lakh retail outlets.
Going by recent deals that have been sealed — Kraft Heinz’s Complan and Glucon-D, which was acquired by Zydus Wellness for $628 million — industry analysts expect the GSK deal to close at a premium, given that Horlicks is four times the size of Complan. Ever since GSK announced its intent to sell the business, quite a few multinationals and a private equity fund, such as Coca-Cola, ITC, PepsiCo, Reckitt Benckiser and KKR, showed a keen interest, but later dropped out.