GSK floats $3.4 bln Hindustan Unilever stake in largest India block trade

GSK floats $3.4 bln Hindustan Unilever stake in largest India block trade

GlaxoSmithKline has sold its stake in Unilever’s Indian business for $3.4 billion, a milestone in India’s largest block trade.

The British company aims to reinvigorate its drug development pipeline from the deal.

The transaction GSK announced on Thursday comes as it pursues a two-year diversification plan to split into two entities. Contingencies had hampered its previous bets on new health market opportunities.

The drugmaker is cashing in a 5.7% stake it took in Hindustan Unilever, to augment the sale of its malted drink brand Horlicks and other nutrition brands to Unilever in 2018.

A total of  133.77 million shares were floated 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.

GSK will receive 2.9 billion pounds ($3.59 billion) from the stake sale and the sale of its Bangladesh business, which is expected to close later this year.

It said the recent Hindustan Unilever share price gains beat analyst forecasts and steps out of the shadows of  Sun Pharmaceuticals' $3.18 billion stake in April 2015.

On a global basis, the Glaxo block trade is the 10th ever biggest, while the largest ever block trade remains Naspers selling $9.8 billion worth of Tencent stock in Hong Kong in March 2018.

Credible sources report  that over 100 institutional investors - 80% foreign investors and 20% domestic Indian funds - participated in the deal.

Shares of Mumbai-listed Hindustan Unilever, which fell as much as 5.38% to 1,902 rupees, recouped some of those losses to close down 0.9% on Thursday. The company declined to comment on the stake sale.

“In an environment of heightened risk aversion, people continue to look at sectors such as consumer staples, healthcare and IT as safe havens.”

HSBC Holdings, JPMorgan and Morgan Stanley were the bookrunners on the deal.

 Global market players

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.

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

Would there be more diversification of GSK’s assets?

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

This is not the first time GSK is shedding its assets having sold travel vaccines to Bavarian Nordic for up to 955 million euros in October last year.