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A group of big names including France’s Danone, Hindustan Unilever and Nestle are vying with US private equity giant KKR & Co to acquire GlaxoSmithKline plc’s 72 per cent stake in its Indian consumer products division, GSK Consumer Healthcare, in a massive $4-billion deal, the biggest in the Indian consumer industry.
The other contenders for the stake include PepsiCo, Abbott, ITC and Mondelez which has been on block after the UK-based multinational pharma giant started mobilising resources to fund its $13-billion acquisition of Novartis’ consumer products.
The initial bids have come and talks are at an early stage, said sources with direct knowledge of the matter.
The transaction, perhaps the biggest in Indian consumer history, is expected to gather pace in June when the indicative bids turn into formal non-binding ones and the company shortlists contenders for the second round of negotiations, sources said.
As per Monday’s market value, 72 per cent of GSK is worth around Rs 17,980 crore and the deal could include an open offer to minority shareholders of GSK Consumer Healthcare.
Danone has hired Lazard as its financial advisor. GSK, which holds some of the best-selling consumer brands including Boost and Horlicks, has hired two US banks to manage the stake sale process.
While GSK said it won’t comment on market speculations, the company had said on March 27 that it would assess its Indian consumer healthcare subsidiary as it looks to fund a buyout of Novartis’ stake in their global consumer healthcare joint venture.
“The purpose of the review is to assess the strategic options for our wellknown and highly valued nutrition brands, including Horlicks and Boost. These brands are licensed and distributed through GlaxoSmithKline Consumer Healthcare Ltd, a publicly listed company in India in which GSK owns 72.5 per cent stake. We are conducting this strategic review in support of our transaction to buy out the Novartis stake in our Consumer Healthcare joint venture with Novartis. We expect the outcome of the strategic review to be concluded around the end of 2018. There can be no assurance that the review process will result in any transaction,” it said on March 27.
For companies such as Danone, HUL, ITC and Abbott, GSK’s consumer division looks pretty much in line with their product portfolio and could be the best strategic fit.
KKR, which rose to global prominence with its $25-billion historic takeover of US food and tobacco giant RJR Nabisco in 1989, is one of the most aggressive private equity investors in India. The New York-based firm, which has raised a record $9.3 billion Asia fund, has been looking for big-ticket strategic assets in India.
Analysts expect the sale of Horlicks brand, or sale of Indian products.
“We assign a high probability of a global sale of the Horlicks brand, or a slump sale of Malted Food Drink (MFD) brands in India (Horlicks, Boost etc) and allied assets (excluding distribution infrastructure). We believe minority shareholders in India (GSK plc holds 73 per cent in GSK Consumer India) may be appropriately compensated if the parent sells the Horlicks brand globally,” Deutsche Bank said in a note on March 21.
