Coca-Cola is set to buy GlaxoSmithKline’s consumer nutrition business. This marks an entirely new venture for the Atlanta headquartered firm and could give it bandwidth to play in the pure health-nutrition space aimed primarily at children.
The GSK stock rose as much as 6.52% or a massive 395 points to trade at 6470 level on the BSE.
Coke has mandated Citi to help them in the competitive bidding process expected to launch next week.
“The evaluation work had begun even though the sale process is yet to formally launch. It will be a large transaction, so work has already begun,” said an official involved, on condition of anonymity as the discussions are in private domain. “This also marks the company’s return to big bang M&A in a market like India.”
Nestle, Danone and HUL among other firms are also eyeing GlaxoSmithKline’s consumer nutrition business.
Consumer healthcare products of GlaxoSmithKline Consumer Healthcare include Horlicks, Boost, and Maltova among others.
GSK Consumer’s Horlicks and Boost brands have strong positioning in Indian market and command approximately 70% of overall value market share in Indian Malted Food Drinks (MFD) market.
These products had combined revenue of £550 million in 2017, with India contributing most of it. However, in March the company decided to review and potentially sell the nutrition products business to fund the $13-billion buyout of Novartis’ stake in a consumer healthcare JV.
The review will also include an assessment of the parent’s 72.5% stake in GSK Consumer in India. The current market cap of the company is Rs 25,544.95 crore.
The outcome of this review is likely by end-2018 which may or may not result in any transaction, eventually, as per the company. Morgan Stanley and Greenhill are advising GSK in the sale.