GlaxoSmithKline sells $3.35B Unilever India stake in unwinding of consumer health business

GlaxoSmithKline has offloaded a chunk of its consumer health business in a deal that earned the company more proceeds than expected.

On Thursday, GSK said it sold its entire 5.7% stake in Unilever’s Indian business, known as Hindustan Unilever, for Rs. 254.8 billion ($3.35 billion). The British pharma got its hands on the shares in its divestment of Horlicks drinks and other consumer health nutrition brands to Unilever, a deal that just wrapped up in April.

Size-wise, the deal topped another major Indian transaction in recent memory—Daiichi Sankyo’s now-infamous $3.2 billion sale of Ranbaxy Laboratories to Sun Pharma in 2015.

GSK actually got a bit more than what it had originally expected. When it first unveiled the Horlicks sale in December 2018, it was hoping to collect about £3.1 billion ($3.81 billion) in gross proceeds from the entire transaction based on Hindustan Unilever’s stock price of Rs.1,717 ($22.65) at that time. But since then, the unit’s share price has jumped to Rs.1,905 ($25.13) per share on average, leading to gross proceeds of about £3.4 billion.

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Selling those Unilever shares marks an important step for GSK’s withdrawal from consumer health, centered on a planned spinoff of its joint venture with Pfizer. The British pharma is in the process of leaving the field to focus on higher-margin innovative drugs and vaccines.

To do that, it unveiled the combination of its consumer health business with Pfizer’s to create the world’s largest OTC franchise in late 2018. The goal is to spin off the unit into a standalone company in about two years.

In the first quarter, the JV got a sales boost from consumers stockpiling its products because of the pandemic. The unit’s £2.86 billion ($3.51 billion) turnover marked 11% growth, with about two-thirds of the increase related to COVID-19, GSK Chief Financial Officer Iain Mackay said during a conference call last week.

So far, “integration of the joint venture with Pfizer is progressing very well,” GSK CEO Emma Walmsley said on the call, noting that the drugmaker was “on track” to hit its cost-cutting targets and 90% of its new leadership roles in place.

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To help cover the £1.6 billion cash cost for hiving off the business, GSK is planning to sell some non-core consumer products potentially worth £1 billion, including its Latin American portfolio and several European products. Part of that European stable recently went to Germany’s Stada in a deal worth at least €300 million.