Anglo-Dutch food giant Unilever said Monday it is buying GlaxoSmithKline's health drinks portfolio in Asia for a total of 3.3 billion euros ($3.7 billion), including iconic night-time hot drink Horlicks.
Horlicks comfortably dominates the health-drinks market in India and Unilever is expected to try and give it a fresh lease of life, following a slowdown in sales growth in recent years.
The second-biggest deal by value in the consumer goods space is that of Diageo picking up majority stake in United Spirits. The transaction is an all-equity merger, with 4.39 shares of Hindustan Unilever to be allotted for every share in GSK India.
"The acquisition is transformative for our foods and refreshment business allowing us to enter the health foods drinks category, further strengthening our position in health and wellness".
Following the closure of the deal, which is expected in around 12 months, GSK will own approximately 5.7 percent of HUL and the British drugmaker intends to sell this down in tranches.
GSK is selling its 82% stake to GlaxoSmithKline Bangladesh Limited and other related brand rights for GSK's consumer healthcare nutrition activities in other territories to Unilever.
"We will become one of the largest F&R businesses in the country", Mehta added.
Commenting on the development, HUL CMD Sanjiv Mehta, Chairman and Managing Director said: "With this proposed strategic merger with GSKCH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers".
This implies a total equity value of Rs 317 billion (about 3.96 billion Euro) for 100 per cent of GSK CH India and represents a premium of about five per cent, based on the 15-day VWAP of both the respective shares ending November 30, 2018.
Shares of GSK India and Unilever's India arm, Hindustan Unilever, rose more than 4% in Indian stock markets after the announcement.
The average growth rate has been double digit over the last decade.
The category still remains under-penetrated in India. HUL now looks to strengthen its position in the rest of the market that is growing at 17 percent, he said.
The deal entails multiple transactions. "The transaction is subject to the satisfaction or waiver of the conditions precedents in the SPA (including necessary regulatory formalities and approval in accordance with the laws of Bangladesh)". However, brands like Boost, Viva and Maltova will remain with the merged entity.