GSK to sell Horlicks and India business for $4 bn to acquire Novartis

GlaxoSmithKline Plc (GSK), the parent of GSK Consumer Healthcare India (GSKCH), is reviewing a full or partial sale of its stake in its Indian Arm besides the Horlicks business for a total of around $4 billion to part finance its $13-billion acquisition of Novartis.

Food giants Nestle, Kraft Heinz and Unilever are expected to bid for GSK’s Horlicks business, which had revenues of £550 million (Rs5,050) in 2017 according to GSK.
Besides the 150-year-old health drink brand, the British pharma major is looking to trim its stake in its Indian unit GSK Consumer Healthcare to fund the buyout of Novartis’ stake in a global consumer healthcare joint venture.
The total value of GSK’s consumer health nutrition business is estimated to be over $4bn (including $3.1bn valuation for the India business) at current market prices.
GSK Consumer revenues contributed 85 per cent of its annual sales revenue, based on its quarterly results.
GSK Consumer is a listed entity with a market capitalisation of Rs28,000 crore, valuing it at a price-to-sales of 6.5 times, which in turn values its entire Horlicks business at £3.6 billion.
Horlicks has a 44.1-per cent market share in health food drinks, but the going has been tough for GSK Consumer as the market for malted food drinks has not grown as strongly as expected. Recent years have also seen demonetisation and the GST hit its business, though the December quarter saw growth pick up.
GSK Consumer has stretched the brand to the extremes with variants targeted at women and adults, apart from children. Besides, it has ventured into products such as noodles, which has yet to be a success. It has now entered the protein drink segment, competing with pharmaceutical companies.
A new owner would probably look at the business differently and push for higher growth, even if it means a little lower profitability in the near term.
The company is looking to increase its focus on OTC and oral health categories, according to a statement by GSK. GSK’s products in this category include Sensodyne toothpaste, Eno antacid, Panadol pain relievers, muscle gel Voltaren and Nicotinell patches.
Nearly 85-90 per cent of total Horlicks sales come from the India market. According to Emma Walmsley, CEO of GlaxoSmithKline, India continues to remain a priority market for GSK.