European consumer goods giant Unilever Plc is poised to purchase the Indian business of GlaxoSmithKline Plc (GSK), which includes the popular Horlicks and Boost brands, pipping its competitor Nestle SA in a fiercely contested auction.

Unilever has all but clinched the deal, people familiar with the matter said, adding that the company has launched exclusive talks with GSK to buy its Indian business — GSK Consumer Healthcare — for $4 billion.

GSK owns a 72.5 percent stake in GlaxoSmithKline Consumer Healthcare.

The deal will give Unilever a significant boost in its most important emerging market.

While Nestle was seen as the frontrunner, Unilever turned the tide in its favour by sweetening its proposal and beating the rival bid from its Swiss rival, the people quoted above said, asking not to be named.

Unilever converted its original share deal into a cash deal to clinch the transaction, said the people. The original deal involved merging the GlaxoSmithKline Consumer Healthcare with Unilever's Indian unit HUL. Now Unilever will offer to buy GSK Consumer Healthcare for cash, they said.

“We are conducting a strategic review and expect to conclude that (deal) by the year-end,” GSK Consumer Healthcare told CNBC-TV18.

When contacted, HUL said, “We have no comments to offer on market speculation.” Nestle told CNBC-TV18, “We do not wish to comment on speculation.”

The share deal by Unilever was a sticky point in the transaction because GSK did not want to wait for a long-haul merger process and wanted cash rather than shares from the sale. Nestle initially had an upper hand because it offered cash to buy GlaxoSmithKline Consumer Healthcare. The company planned to merge GSK’s business with its India unit later.

Now, Unilever may look at merging GSK Consumer Healthcare with HUL only after the deal to extract full strategic benefit.

“The distribution network for GSK Pharma’s OTC (over the counter) products, which is under GSK Consumer is also an important aspect in the deal and GSK wanted the continuity. Unilever’s proposal may have that component as well,” said one of the people quoted above.

Besides GSK Consumer Healthcare, which is listed in India, the deal includes GSK’s listed unit in Bangladesh, the Horlicks and Boost business in 20 other countries in Asia and the Middle East. GSK’s Group brand royalty could be part of the transaction, said the people familiar with the matter.

If HUL merges GSK Consumer at a value up to Rs 8,000 a share, it will be EPS (earnings per share) accretive and positive for the Indian consumer goods company, said market analyst SP Tulsian.

Besides Nestle and Unilever, foods company Coca-Cola was also interested in GlaxoSmithKline Consumer Healthcare.

Horlicks is an over 140-year-old brand. Indian soldiers who had fought with the British Army in the First World War introduced the brand in India.

First Published:Nov 28, 2018 8:54 PM IST