Apart from Horlicks, brands such as Boost, Maltova and Viva—part of GlaxoSmithKline Consumer—will come under HUL’s umbrella
HUL dominates Indian market with key brands such as Lux, Rin, Sunsilk, Kissan, among others
NEW DELHI :
Hindustan Unilever Ltd (HUL) has completed the merger of GlaxoSmithKline Consumer Healthcare Limited (GSKCH) with itself, over a year after the Rs31,700 crore mega-deal was first announced. The company has additionally paid Rs3,045 crore to acquire the Horlicks brand for India from GSK after seeking approval from the board of directors of HUL—exercising the option available in the original agreement made between Unilever and GSK, the company said in a statement.
GSKCH’s brands such as Horlicks, Boost, and Maltova will now be part of the company’s food and refreshments business falling under the nutrition category. As part of the merger, 3,500 employees will now become part of the Indian arm of the Anglo Dutch giant Unilever. Under the deal, HUL will distribute GSK’s brands like Eno, Crocin, Sensodyne etc in the country.
Krishnan Sundaram, vice president, integration and change management, will lead the business, reporting into Sudhir Sitapati, executive director, foods and refreshments, HUL.
Post the completion, GSK Plc (including group companies) will own 5.7% of the merged entity; while Unilever shareholding in the combined company will be 61.9% versus 67.2% prior to the merger.
"GSK intends to monetise its holding in HUL at such time it considers appropriate, taking into account market conditions," the British multinational said in a separate statement to the press.
The merger was first announced in December 2018 — making it one of the deals in India and giving HUL, already India’s largest packaged consumer goods company, more room to dominate. The merger was awaiting necessary regulatory approvals since.
In a call to discuss the finality of the merger on Wednesday, HUL chief financial officer Srinivas Phatak said the company took a call to own the flagship health food drinks brand Horlicks instead of opting to pay royalty to the parent company.
“If you see the original the deal as envisaged—there was always an option from a Unilever perspective for either Unilever to buy the brand or any one of the group companies to buy the brand. Today we have taken approvals from the HUL board to buy the brand for the India territory as HUL. This will mean we will not be paying any brand royalty and we have utilized the cash to own the brand," Phatak said, adding GSKCH was paying its parent royalties between 1.7% and 4.5% on Horlicks brands, depending on the brand and variant.
Apart from Horlicks, brands such as Boost, Maltova and Viva — part of GSKCH — come to HUL’s brand portfolio by virtue of the merger.
In a separate statement to the media on Wednesday, GSK Consumer Healthcare said India remains an important growth market and the company is committed to investing in both its listed pharmaceuticals business and its OTC and oral health brands in this country.
In India, HUL said the GSKCH business—or the nutrition portfolio—will now function as part of its food and refreshments (F&R) business segment.
“From a day-day execution point of view—the nutrition business will be part of F&R business and in that we today have tea, coffee, ice-cream, and packaged foods. Therefore, nutrition will become one other part of our F&R division, and will be classified as a separate category country business team (CCBT). That team will look at unlocking the opportunity in the HFD segment," Phatak said in a separate statement to the press.
The nutrition business head will lead a CCBT and a integration team that will work over the next 18 months to draw out synergy plans, create business processes and IT harmonization.
In FY19, the company’s food and refreshments business was 19% of its segmental revenue, after home-care, and beauty and personal care, HUL's largest revenue contributor.
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