Consumer rights

GSK Consumer Healthcare-HUL merger in spotlight as GSK rejects Unilever bid

New Delhi: Consumer goods company Unilever Plc’s – which has made three separate bids for GlaxoSmithKline’s (GSK) consumer business – comes nearly two years after its Indian arm Hindustan Unilever Ltd (HUL) successfully merged with GlaxoSmithKline Consumer Healthcare Limited (GSKCH) in India, giving it access to health drink brands, such as Horlicks, Boost and Maltova in the country.

The 2020 deal gave HUL weight in the nutrition category in India. Unilever has also acquired the rights to health drink brands in some 20 other mainly Asian markets.

On Saturday, GlaxoSmithKline said it rejected three proposals from Unilever to acquire GSK’s consumer healthcare business. The last proposal received on December 20, 2021 was for a total acquisition value of £50 billion, the company said in a statement. GlaxoSmithKline rejected all offers saying it “fundamentally undervalued” the company and its future prospects.

Unilever, on the other hand, has confirmed its interest, saying GSK’s consumer healthcare would be a “strong strategic fit” as Unilever continues to reshape its portfolio which spans from beauty products to food and refreshments.

A potential deal between the two would give the maker of Dove soaps and Hellman’s mayonnaise, access to several major over-the-counter brands such as Crocin, Tums, as well as Sensodyne oral care products, among others.

Back in India, GSK continues to run separate businesses – a pharmaceutical vertical and a rapidly growing consumer goods business under GSK Consumer Healthcare which markets brands such as Sensodyne, Parodontax, Eno, Crocin and Otrivin in India.

However, in 2020, when HUL merged listed entity GlaxoSmithKline Consumer Healthcare Limited (GSKCH) with itself into a 31,700 crore deal – HUL has secured a ready made portfolio of health food drink (HFD) brand Horlicks in addition to Boost, Maltova and Viva. As part of the transaction, HUL also obtained the distribution rights for the Sensodyne, Crocin, Otrivin and Eno brands, for GSK in India. GSK will continue to be responsible for demand generation, portfolio strategy, R&D and marketing for these brands, the two said in 2020.

As part of the deal, first announced in 2018, HUL acquired the Horlicks brand for India from GSK for 3,045 crores. Horlicks, India’s largest health drink brand, has over 60% market share in the category.

HUL outbid rivals Nestle India and ITC Ltd. to acquire the brands in India, underscoring the importance of GSK’s nutrition portfolio in the country.

“The merger is in line with HUL’s strategy to create a sustainable and profitable food and refreshment (F&R) business in India by leveraging the health and wellness megatrend,” HUL said after discussing announced the completion of the merger in 2020.

Meanwhile, HUL continued its nutrition business with the aim of gaining greater market share and fostering household penetration for the Horlicks brand in India.

The nutrition and health drink category remains “under-penetrated” in the country and HUL is well positioned to further develop the market given its breadth of reach and capabilities, he said at the time.

HUL has also launched Horlicks Diabetes Plus and is investing in market development, with the launch of 2 and 5 sachets in order to conduct trials and unlock new markets, brokerage Edelweiss Securities said in a December 2021 note.

The company has expanded the distribution margin of the Horlicks brand and is also pushing GSK’s over-the-counter brands through pharmacy channels, according to a person familiar with the company’s plans.

HUL also doubled direct coverage of the nutrition business from pre-acquisition, the brokerage said in its memo.

Meanwhile, the prospects for a global deal remain uncertain.

In its statement, GSK said Unilever’s proposals were “not in the best interests” of GSK shareholders. “GSK’s Board of Directors therefore remains focused on executing its plan to spin off the consumer healthcare business, to create a new independent global category-leading consumer products company which, under subject to shareholder approval, is on track to be achieved in mid-2022,” GSK said in its statement.

GSK’s consumer healthcare business is a joint venture between GSK and Pfizer, with GSK holding a controlling majority stake.

To subscribe to Mint Bulletins

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our app now!!