GSK sells $3.35 billion stake in Hindustan Unilever

By Scott Murdoch and Anshuman Daga

HONG KONG/SINGAPORE (Reuters) – GlaxoSmithKline said on Thursday it sold its stake in Unilever’s Indian business for $3.35 billion, which Refinitiv says is the largest block trade ever to have been carried out in India.

The funds will help GSK in its goal of reinvigorating its drug development pipeline, having made costly bets on experimental cancer treatments and future cell and gene therapies amid sluggish revenue growth.

The 5.7% stake in Hindustan Unilever was accepted by GSK as payment for the sale of its malted drink brand and other nutrition brands to Unilever , agreed in late 2018.

The 133.77 million shares were offloaded on average for 1,905 rupees, according to a statement from GlaxoSmithKline.

Potential investors were earlier told the shares would be sold in a range of 1,850 to 1,950 rupees, which was a 3%-8%discount to Wednesday’s closing price of 2,010.20 rupees.

In the statement, GSK said it would now receive net proceeds from the Horlicks divestment of 2.9 billion pounds ($3.59 billion), up from its original expectation of 2.4 billion pounds.

It said the recent Hindustan Unilever share price gains led to the better than expected outcome.

The deal, at $3.35 billion, eclipses the previous block trade record in India when Daiichi Sankyo sold its $3.18 billion stake in Sun Pharmaceuticals in April 2015, according to Refinitiv.

On a global basis, the Glaxo block trade will be the 10th ever biggest, according to the data provider.

The largest ever block trade remains Naspers selling $9.8 billion worth of Tencent stock in Hong Kong in March 2018.

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GSK’s decision could also inject some momentum into India’s equity capital markets which have struggled in line with other major financial markets as a result of the coronavirus pandemic.

There has been $6 billion worth of equity capital market deals in India so far in 2020, down from $8.52 billion during the same time list year, according to Refinitiv.

The data showed the rate of activity in 2020 is the slowest since 2017.

In comparison, Hong Kong’s equity capital markets have seen $12.8 billion worth of activity this year.

GSK struck a deal in 2018 to fold its Indian business – whose main product is Horlicks – into Unilever’s Indian unit Hindustan Unilever in exchange for shares in the combined group.

According to GSK’s first-quarter report, it completed the Horlicks deal on April 1, receiving the 5.7% equity stake in Hindustan Unilever plus about 400 million pounds in cash.

Earlier this year, GSK launched a two-year programme to split into two entities, separating the core prescription drugs and vaccines business from an enlarged over-the-counter products business that was merged with a Pfizer unit.

It is considering more divestments to fund the costs of the separation.

Having sold travel vaccines to Bavarian Nordic for up to 955 million euros ($1.03 billion)in October last year, the British group is looking into shedding more assets, starting with a review of its prescription dermatology business with about 200-300 million pounds in annual sales.

(Additional reporting by Sumeet Chatterjee in Hong Kong. Writing Ludwig Burger)