GSK’s Sale of its $3.4 Billion Unilever Stake became India’s largest Block Trade

GlaxoSmithKline Plc (GSK), a British pharmaceutical company announced that it has sold its stake in a leading Indian consumer goods giant, Hindustan Unilever Ltd. (Unilever), for $3.4 billion.

The deal, in which HSBC Holdings, JPMorgan, and Morgan Stanley were the book runners, marked India’s largest block trade which surpassed the previous biggest block deal when Daiichi Sankyo sold its $3.18 billion stakes in Sun Pharmaceuticals in April 2015, according to Refinitiv.

GSK’s Sale to Focus on Drug Development

The news of the deal transaction was announced by GSK on Thursday, May 8, 2020, and the deal would help the drug manufacturing company to regenerate its business operations of drug development. The drugmaker reported that it has converted its 5.7% stake, which was owned as payment for the sale of its malted drink brand Horlicks and other nutrition brands to Unilever in 2018, into liquidity.

GSK said in a statement that the 133.77 million shares in the Indian consumer goods manufacturing company were divested on average for 1,905 rupees. Earlier, potential investors were told that the shares price would be set 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 that it would now receive net proceeds of 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 added that the share price of Unilever recently gained a better than expected sale result. Sources said that more than 100 institutional investors, 80% foreign investors, and 20% domestic Indian funds had participated in the deal.

GSK’s Sale was Reasonable

The British company had been facing trouble since it recently pursued a two-year program 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.

Moreover, it has faced hardships after the company made costly bets on experimental cancer treatments and future cell and gene therapies, which witnessed sluggish revenue growth. GSK’s sale of its shares in the Indian company was a part of its divestment policy to fund the costs of the separation of its two entities.

Earlier, Mumbai-listed firm Unilever witnessed a sharp drop of its share price as much as 5.38% to 1,902 rupees but it gained some of those losses to close down 0.9% on Thursday.

Ajay Bodke of Mumbai-based portfolio management service company Prabhudas Lilladher said, “One could argue that the stock was a tad overvalued at the 2,600 level, but at 1,900, it is reasonably valued.” Bodke added, “In an environment of heightened risk aversion, people continue to look at sectors such as consumer staples, healthcare, and IT as safe havens.”

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