GlaxoSmithKline (LON:GSK) has inked a deal to sell its nutrition business to Unilever (LON:ULVR), the companies have said. The move comes after it emerged last week that the FTSE 100 drugmaker had entered into exclusive negotiations with the Anglo-Dutch consumer goods giant for the business, which includes the Horlicks malted drink brand popular in India.
GSK’s share price has climbed higher in today’s session, having gained 0.65 percent to 1,632.18p as of 09:59 GMT, underperforming the broader market rally, with the benchmark FTSE 100 index currently standing 2.28 percent higher at 7,139.57 points. Unilever’s share price is also underperforming the broader London market, trading 0.57 percent higher at 4,267.50p.
GSK divests Horlicks unit
GSK announced in a statement today that it had agreed to divest Horlicks and other consumer healthcare nutrition brands to Unilever. The £3.1-billion deal includes the merger of GSK Consumer Healthcare (GSK India) with Hindustan Unilever (HUL), following which the FTSE 100 pharmco will own approximately 5.7 percent of HUL. Following completion of the transaction, currently expected by the end of next year, GSK intends to sell down its holding in HUL in tranches.
“Horlicks has made a significant contribution to GSK and to the health of consumers across India for many decades and we believe Unilever is well placed to maximise its future potential,” GSK’s chief executive Emma Walmsley commented in the statement, adding that the group would use the proceeds from the deal to support its strategic priorities, including investing in the company’s pharmaceutical business. GSK expects net proceeds of about £2.4 billion.
Unilever flags synergies
Unilever commented on the deal in a separate statement, saying that its share of the total consideration was €3.3 billion payable using a combination of cash, and shares in HUL.
“The transaction is aligned with Unilever’s stated strategy of increasing its presence in health-food categories and in high-growth emerging markets,” the Anglo-Dutch group said in the statement, adding that it expects to achieve ‘substantial synergies’.