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Unilever To Buy GSK's Indian Horlicks Unit For EUR 3.3 Bln

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Consumer goods giant Unilever plc (UN,ULVR.L) said Monday that it has agreed to acquire the Health Food Drinks portfolio, GSK HFD, of UK-based drugmaker GlaxoSmithKline Plc (GSK,GSK.L), in India, Bangladesh and 20 other predominantly Asian markets for 3.3 billion euros, or $3.8 blllion.

Unilever noted that the deal consists of three elements, including an equity merger of its India-listed subsidiary Hindustan Unilever Ltd or HUL with the publicly-listed GSK Consumer Healthcare India or GSK CH India.

In addition, Unilever will acquire an 82 percent stake in GSK Bangladesh Limited for 169 million euros, and also buy certain other commercial operations as well as assets outside India for a total consideration of 470 million euros in cash.

Unilever said its share of the total consideration of 3.3 billion pounds is payable using a combination of cash, and shares in its HUL.

The company noted that the transaction is aligned with its stated strategy of increasing its presence in health-food categories and in high-growth emerging markets.

In 2018, the GSK HFD portfolio delivered total turnover of about 550 million euros, primarily through the Horlicks and Boost brands. Almost 90 percent of the turnover is in India.

The merger of HUL with GSK CH India will be on the basis of an exchange ratio of 4.39 HUL shares for each GSK CH India share. This implies a total equity value of Indian Rupees 317 billion, or 3.96 billion pounds, for 100 percent of GSK CH India.

The transaction represents a nearly 5 percent premium, based on the 15-day VWAP of both the respective shares ending November 30, 2018. Following the issue of new HUL shares, Unilever's holding in HUL will be diluted from 67.2 percent to 61.9 percent.

In a separate statement, GSK said it estimates net proceeds from the transaction to be approximately 2.4 billion pounds. The company will use the proceeds to support the Group's strategic priorities, including investing in its pharmaceutical business, and to reduce its debt.

The transaction is conditional on approval of the merger by the shareholders and creditors of both GSK India and HUL. The boards of both companies have approved the merger.

Both GSK and Unilever, who hold 72.5 percent and 67.2 percent of the shares in GSK India and HUL respectively, intend to vote in favor of the merger.

GSK expects the transaction to be neutral to its earnings. The transaction is expected to be completed by the end of 2019.

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