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Glaxo feeds off Horlicks, strengthens investment

by Andrew Bulkeley  |  Published November 26, 2012 at 10:44 AM
U.K. pharmaceuticals company GlaxoSmithKline plc on Monday, Nov. 26, agreed to increase its minority holdings in units in Nigeria and India to the maximum allowed while maintaining a stock market listing.

The Brentford, England-based company said it would pay up to 52.2 billion rupees ($938.7 million) to increase its stake in India's GlaxoSmithKline Consumer Healthcare Ltd. to 75% from 43.2%.

It will also spend 15.41 billion Nigerian naira ($97.8 million) to increase its 46.4% GlaxoSmithKline Consumer Nigeria plc holding to 80%.

"GSK Consumer Healthcare is a well-established business in India and its leading product, Horlicks, is an iconic household brand. This transaction represents a further step in GSK's strategy to invest in the world's fastest growing markets," said GSK Chief Strategy Officer David Redfern in a statement.

The U.K. company is hoping to get a bigger piece of the pie at two swiftly growing units. The company said its Indian business, whose star Horlicks product is a vitamin and mineral drinks powder taken with warm milk, has grown an average of 19% a year over the past five years while the Nigerian business has expanded 21% a year.

GSK is offering 27% premiums over Friday's close in both transactions. In India, it would pay Rs3,900, while in Nigeria, it's offering naira 48 per share. The announcement pushed shares of GlaxoSmithKline Consumer Healthcare up 20%, or Rs609.85, to

Rs3,659.20 in Bombay, while shares the Nigerian company rose 5%, or 1.87 naira, to 39.38 naira in afternoon Lagos trade.

Last year, the Indian unit had sales of Rs28 billion. The Nigerian division had revenue of 21.5 billion naira - the subsidiary gets about 70% of its sales from consumer healthcare products including Horlicks and Lucozade drinks. The remaining 30% is from vaccines and drugs.

"This proposal to increase GSK's ownership of GlaxoSmithKline Consumer Nigeria reiterates our long term support of the Company's strategy and our confidence in the continuing growth prospects of the business," Redfern said.

GSK is taking financial advice from HSBC Securities and Capital Markets (India) for the Indian share purchase and Citigroup Global Markets Ltd. for the Nigerian offer.

The U.K. company has been relatively quiet on the acquisition front this fall after an acrimonious battle to buy long-time partner Human Genome Sciences Inc. The two hammered out an agreed deal in July, with GSK paying $6.8 billion in cash and debt for Rockville, Md.-based Human Genome.

Tags: Citigroup Global Markets Ltd. | David Redfern | GlaxoSmithKline Consumer Healthcare Ltd. | GlaxoSmithKline Consumer Nigeria plc | GlaxoSmithKline plc | Horlicks | HSBC Securities | Human Genome Sciences Inc. | Lucozade

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