ITC may buy GSK’s nutrition business

GlaxoSmithKline is exploring sale of its 72.5% stake in Indian subsidiary GSK Consumer Healthcare besides planning the sale of Horlicks brand. According to the media reports, GSK initiated a strategic review of Horlicks and its other nutrition products in order to support funding of its $13 billion buyout of Novartis’s stake in the global consumer healthcare joint venture formed in 2015.

 

“GSK is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction, and to drive increased focus on over the counter and oral health categories,” stated GSK’s release. The combined sales of these products were approximately £550 million (around Rs 5,000 crore) in 2017, it added. 

 

According to some analysts, global food companies like Nestle, Kraft-Heinz, Unilever, Mondelez and ITC are expected to bid for GSK’s Horlicks and other health nutrition products.

 

“GSK needs the money to support the Novartis deal. Naturally, it would look to conclude the deal in foreign exchange. Global companies, with presence in both India and Malaysia, such as Unilever, Danone and Nestle are the most likely ones to fight for the brand. ITC, which is looking at a bigger presence in dairy, is the only Indian company that could look at buying Horlicks for multiple reasons. While a few others may be interested, they may opt out because of the deal size that could be 2-3 times of sales,” said Sunil Alagh, chairman, SKA Advisors, and former managing director and chief executive officer of biscuit maker Britannia Industries Ltd, reported Mint.

 

Citing unnamed officials, Reuters reported that Nestle has previously told GSK “privately of its interest in Horlicks on several occasions.”

 

Some analysts said acquisition of the brand by any large packaged foods player would help it only incrementally, given that growth for Horlicks has been sluggish over the past 2-3 years. 

 

Stating that India remains a priority market for GSK, the company had said its consumer healthcare business will continue to invest in growth opportunities for its OTC and oral health brands, such as Sensodyne and Eno. Horlicks accounts for three-fourth of GSK Consumer’s India revenue. 

“GSK expects the outcome of the strategic review to be concluded around the end of 2018. There can be no assurance that the review process will result in any transaction,” the company added.