Unilever has made a voluntary open offer to raise its holding in Hindustan Unilever to 75% from 52.48%. The transaction would represent the biggest stake enhancement in the Indian market and the largest acquisition in the country’s consumer sector.
The Anglo-Dutch consumer giant will pay €4.1 billion (Rs292.2 billion, $5.4 billion) at Rs600 a share for the increased holding in its Indian publicly listed subsidiary, according to a stock exchange filing on Tuesday.
The cash offer is at a 29.5% premium over the mandatory floor price required under Indian regulations, a premium of 26% to Hindustan’s one-month average trading share price and 25% above the past week’s average trading price on the India stock exchange.
The price is 21% higher than the stock’s closing price of Rs497.35 on Monday.
Unilever has offered to buy roughly 487 million shares for the 22.52% stake. Securities regulations in India require a minimum public shareholding of 25% for a company to maintain a public listing.
“This represents a further step in Unilever’s strategy to invest in emerging markets and offers a liquidity opportunity at what we believe to be an attractive premium for existing shareholders,” says Paul Polman, Unilever’s chief executive.
The deal would be the biggest Asia-Pacific cross-border inbound targeted transaction so far this year, and the biggest in the consumer products sector globally, according to Dealogic. It would also be the fifth-biggest India inbound M&A transaction on record and the most substantial UK cross-border acquisition since AngloAmerican paid $7 billion for DB Investments in November 2011
Subject to regulatory clearance, the offer period is expected to start in June, and payment for the shares will take place shortly after the close of the offer. Hindustan’s shares are traded on the Bombay and National stock exchanges.
HSBC is the sole financial adviser for the offer, through its Indian unit. It said the completion of the open offer is subject to receipt of statutory approvals and details of the offer would be published on or before May 8.
Hindustan is a leader in India’s consumer goods business, with brands spanning soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers. Its portfolio includes Lux, Surf Excel, Rin, Closeup, Pond’s, Closeup, Axe, Brooke Bond, Kwality Wall’s and Pureit.
The company’s turnover was more than Rs270 billion, and it made a net profit of over Rs38 billion for the financial year ending March 31, 2013.
Unilever will continue to consolidate 100% of the results and net assets of Hindustan, but the net profits attributable to non-controlling interests and the share of equity of the non-controlling interests will both be lower after the transaction.
In January, Unilever hiked royalty fees payable by Hindustan to 3.15% from 1.4% of its turnover.
Unilever is one of the world’s leading suppliers of food, home and personal care products with sales in more than 190 countries. The firm generated annual sales of over €50 billion in 2012, and it claims that “over half of [its] footprint is in the faster growing developing and emerging markets”.
