HUL-GSK merger complete, FMCG giant buys Horlicks brand for 3,045 crore

In April 2020, Hindustan Unilever Ltd (HUL) has completed the merger of GlaxoSmithKline Consumer Healthcare Limited (GSKCH) with itself, over a year after the Rs31,700 crore mega-deal was first announced. The company has additionally paid Rs3,045 crore to acquire the Horlicks brand for India from GSK after seeking approval from the board of directors of HULexercising the option available in the original agreement made between Unilever and GSK, the company said in a statement.

GSKCH's brands such as Horlicks, Boost, and Maltova will now be part of the company's food and refreshments business falling under the nutrition category. As part of the merger, 3,500 employees will now become part of the Indian arm of the Anglo Dutch giant Unilever. Under the deal, HUL will distribute GSK's brands like Eno, Crocin, Sensodyne etc in the country.

"If you see the original the deal as envisagedthere was always an option from a Unilever perspective for either Unilever to buy the brand or any one of the group companies to buy the brand. Today we have taken approvals from the HUL board to buy the brand for the India territory as HUL. This will mean we will not be paying any brand royalty and we have utilized the cash to own the brand," Phatak said, adding GSKCH was paying its parent royalties between 1.7% and 4.5% on Horlicks brands, depending on the brand and variant. Apart from Horlicks, brands such as Boost, Maltova and Viva part of GSKCH come to HUL's brand portfolio by virtue of the merger.

In India, HUL said the GSKCH businessor the nutrition portfoliowill now function as part of its food and refreshments (F&R) business segment. "From a day-day execution point of viewthe nutrition business will be part of F&R business and in that we today have tea, coffee, ice-cream, and packaged foods. Therefore, nutrition will become one other part of our F&R division, and will be classified as a separate category country business team (CCBT). That team will look at unlocking the opportunity in the HFD segment," Phatak said in a separate statement to the press.

The nutrition business head will lead a CCBT and a integration team that will work over the next 18 months to draw out synergy plans, create business processes and IT harmonization.

Question: How will Hindustan Unilever Ltd. benefit from the acquisition of GlaxoSmithKline Consumer Healthcare Limited? Help in telling all the reasons mentioned above