UNILEVER has offered to pay $5.4bn (£3.4bn) to increase its stake in its Indian division, as the consumer goods giants looks to step up its exposure to the fast-growing market.
The FTSE 100 group behind PG Tips yesterday proposed to up its stake in Hindustan Unilever from 52.48 per cent to up-to 75 per cent. This is the maximum Unilever can acquire for the company to maintain its public listing on the Indian stock exchange.
The bid at 600 rupees per share – a 20.6 per cent premium to Monday’s closing price – sent shares in the Indian subsidiary surging more than 17 per cent although Unilever’s FTSE-listed shares dropped slightly.
If the deal completes it will be the largest consumer M&A deal since November 2009 when Stanley Works merged with Black & Decker.
Paul Polman, Unilever chief executive, said: “The long heritage and great brands of Hindustan Unilever, and the significant growth potential of a country with 1.3bn people makes India a strategic long term priority for the business.”
The offer, payable in cash, is expected to begin in June, subject to regulatory clearance.
Panmure Gordon analyst Graham Jones said the deal made “a lot of sense” strategically and financially but should have been done sooner.
“Unilever has been on the hunt for emerging market deals for a long time, but this was always under its nose. The performance of Hindustan Unilever has improved significantly in recent years, and so we think this deal is better late than never,” Jones said.
The company last week posted a weaker-than-expected 4.9 per cent rise in underlying third quarter sales after a cold spring hit sales of its ice-cream brands, which include Magnum and Wall’s. But sales in emerging markets jumped 10.4 per cent and made up 57 per cent of turnover. Hindustan Unilever recently posted a 15 per cent rise in March quarter earnings.