Mumbai: Anglo-Dutch consumer goods company Unilever Plc announced on Tuesday that it will
increase its stake in Indian subsidiary Hindustan Unilever Ltd (HUL)
to 75% from 52.28% by spending as much as Rs.29,220 crore in a bid to sharpen
its focus on India and potentially offset slowing sales in Western markets.
“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. The long heritage and great brands of Hindustan Unilever, and the
significant growth potential...makes India a strategic long-term priority for
the business,” chief executive officer Paul Polman said in a statement on the Unilever
website.
On 25 April, Unilever reported that
growth in its developed markets declined in the March quarter from a year ago.
However, growth remained robust in emerging markets despite continuing
macroeconomic headwinds, the maker of Lux and Dove soaps, and Knorr soups said
in a press statement on its website.
For fiscal 2012 (January-December),
Unilever’s net profit grew 5.36% to €4.48 billion from €4.25 billion, and net
sales grew 10.45% to €51.32 billion from €46.47 billion.
On 29 April, HUL said that for the
full year ended 31 March, the net profit of its domestic consumer business grew
41% to Rs.3,797 crore—the highest in the last five years. Net sales grew 16%
for the full year, with 7% volume growth, to Rs.24,167.7 crore.
Unilever’s biggest deal in 13 years
prompted a stock rally, and HUL closed 17.28% higher on BSE at Rs.583.60.
The parent will pay Rs.600 per
share, a 20.6% premium to the Monday closing price and 2.8% up on the Tuesday
close.
The price is “a premium of 26% to
HUL’s last one month’s average trading share price and 25% to the last one
week’s average trading price on the National Stock Exchange of India Ltd”,
Unilever said in a press release on Tuesday morning.
The Unilever deal will be the
largest Asia-Pacific cross-border inbound targeted transaction in 2013
year-to-date and the largest in the consumer products sector globally,
according to Dealogic (Holdings) Plc , a research provider. It
is the biggest UK cross-border acquisition since AngloAmerican Plc ’s $7 billion bid for DB
Investments in November 2011, Dealogic said
The deal will be funded by cash and
bank facilities and Unilever has no intention of delisting the Indian unit,
Unilever spokesperson Trevor Gorin said in an email.
In the past year, the HUL stock has
risen 40.17%, outperforming the BSE FMCG index, which gained 37.23%, and the
BSE benchmark Sensex, which rose 12.62%. The stock also outperformed peers ITC Ltd, which rose 33.94%, Nestlé India Ltd (up 6.62%), and Procter and Gamble Hygiene and Health Care Ltd
(up 31.88%).
To be sure, about four years ago,
when Polman took charge of the company after spending close to 25 years at Procter and Gamble Co. (P&G) and four years
at Nestlé SA, “the Indian unit was perceived as a
laid-back company losing market share to rivals”, said Abneesh Roy, associate director (institutional
equities, research) at Edelweiss Securities Ltd.
AMIT KUMAR SINGH
PGDM - 2ND SEM
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