HUL Results Q3FY19: Hindustan Unilever expects merger with GSK to complete in next 6-9 months; 10 things to know about this Rs 31,700-cr deal

HUL Results Q3FY19: While posting a good December 2018 (Q3FY19) quarter result, one of the major key highlights was Hindustan Unilever's announcement on its merger with another consumer service provider GlaxoSmithKline Consumer Healthcare Limited (GSK CH). HUL stated that the board of directors has approved a scheme of amalgamation between the company and GSK. Transaction of this deal is an all-equity merger with 4.39 shares of HUL being allotted for every share in GSK CH India. Company expects merger to complete in next 6-9 months. 

This would be among major FMCG deal, as the transaction values to a behemoth Rs 31,700 crore. 

Here's a list of 10 things to know about this mega-merger. 

1. The scheme contemplates the amalgamation of GSK CH with HUL and the dissolution without winding of GSK CH pursuant thereto. The appointed date for the shall be the date from which the scheme will get effective.

2. Since HUL and GSK CH are not related parties, hence the amalgamation of company and GSK CH would not fall within related party transactions. 

3. GSK CH is one of the key players in food and refreshment category with iconic brands like Horlicks and Boost and comprises a wide product portfolio. Post merger, the Horlicks and Boost will belong to HUL. 

4. Proposed amalgamation of GSKCH business, is HUL's strategy to build a sustainable and profitable food and refreshment business in India. The parties expect significant synergies through supply chain opportunities and operational improvements, go-to-market and distribution network optimization, scale efficiencies in cost areas such as marketing and optimization of overlapping infrastructure. 

5. Share exchange ratio for the amalgamation of GSK CH with HUL will be 4.39 equity shares of face value Rs 1 each of HUL for every 1 share at face value of Rs 10 each held by shareholders of GSK CH. This means HUL will buy these shares at a massive discount.

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6. As on December 2018, HUL's total asset segment stands at Rs 17,415 crore, with revenue and a net profit of Rs 9,357 crore and Rs 1,444 crore respectively. 

7. GSK CH has total assets of Rs 5,583 crore as on September 2018, with a net worth of Rs 3,591 crore. 

8. During the process of merger, parent Unilever's holding in HUL will be diluted to 61.9% from previous 67.2%.

9. HUL expects post-merger, its food and refreshment (F&R) business to exceed the company's turnover of Rs 10,000 crore. 

10. As on December 2018, HUL's revenue from F&R business came in at Rs 1,728 crore in Q3FY19, increasing by 9.92% from Rs 1,572 crore in Q3FY18. Beverages delivered good growth by leveraging the opportunity in the mass segment and driving premiumization through green tea. Ice Cream and Frozen deserts sustained its growth momentum. Also, Magnum Hazelnut was launched in select geographies.

Currently, the deal is subject to shareholder and statutory approval. 

On BSE, the share price of HUL finished at Rs 1,750.10 per piece down by Rs 19.90 or 1.12%. On the other hand, the share price of GSK CH ended at Rs 7309.45 per piece down by Rs 132.50 or 1.78%.