HUL now owns Horlicks, Boost

MUMBAI: The merger of GlaxoSmithKline Consumer Healthcare (GSKCH) with Hindustan Unilever (HUL) — one of the largest FMCG deals — is complete. Now, the board of HUL has also approved the takeover of brand Horlicks from GSK global. This option was available to HUL in the original agreement between Unilever and GSK, which was signed in December 2018. HUL will pay a consideration of Rs 3,045 crore (376 million euros) to GSK through its internal accruals. Since HUL is buying the brand, it will not pay any brand royalties. Brands Boost, Maltova and Viva, which were owned by GSKCH, would be automatically transferred to HUL. The merger, for which all necessary approvals have been obtained, has been done on the basis of an exchange ratio of 4.39 HUL shares for each one of GSKCH. Following the issue of new HUL shares, Unilever’s holding in HUL will be diluted from 67.2% to 61.9%. GSK, on the other hand, gets an ownership of 5.7% in HUL after the merger.In a conference call with media persons, HUL’s CFO Srinivas Phatak said GSKCH’s nutrition team of 3,500 employees will join HUL. GSKCH brands will form part of HUL’s food and refreshment (F&R) portfolio. HUL said the merger will bring a market development opportunity to drive premiumisation through the high sciences portfolio.The merger is effective April 1. HUL, with the number one health food drinks portfolio in its kitty, emerges as one of the largest foods companies in India, in addition to it being the numero uno home and personal care company. Horlicks has a volume share of close to 50%. It was introduced to India in the 1930s and has been an everyday nutrition staple in households across generations. In a statement, HUL CMD Sanjiv Mehta said, “Brands such as Horlicks and Boost are iconic, and we are excited to have them in the Hindustan Unilever fold. The merger gives us a unique opportunity to live our purpose and serve India where nutrition-related challenges form the largest causes of disease — malnutrition and micronutrient deficiency — and aligns well with the government’s ambitious Swasth Bharat and Poshan Abhiyaan programmes.” After the merger, HUL’s F&R business (Rs 7,133 crore in 2018-19) would near its home care portfolio (Rs 12,876 crore) in sales. “Given the potential of the business, it could grow in double digits in the medium term. One opportunity is to expand the portfolio to rural markets,” said Phatak.Phatak said the firm will now begin work on integrating IT, SAP systems and processes, and the cultural integration, all of which will take 9-12 months to accomplish. “We will look into synergy aspects and execute and implement it in a seamless manner,” said Phatak. The nutrition and health drinks category remains under-penetrated in India and HUL is well positioned to further develop the market, given the extent of its reach and capabilities. As part of the deal, HUL will be partnering with GSK (via a consignment-selling arrangement) to distribute GSKCH brands like Eno, Crocin and Sensodyne in India.Mehta said, “In the current context, the focus of the company has been to ensure that all our people remain safe and we do our best to keep supply lines running for essential products. In these difficult times, we are joining hands with the government in the fight against Covid-19.”