Anglo-Dutch consumer goods giant Unilever Plc will spend USD 5.4 billion (over Rs 29,380 crore) to hike stake in its Indian arm Hindustan Unilever to 75 per cent through an open offer.
Unilever will pay Rs 600 a share in an open offer to raise its stake in Hindustan Unilever to 75 per cent from the current 52.48 per cent,the company said in a filing to the stock exchanges.
The price is 21 per cent higher than the stock’s closing price of Rs 497.35 yesterday.
The world’s second-largest consumer goods company “is making a voluntary open offer to acquire 48,70,04,772 shares representing 22.52 per cent of the total Voting Share Capital from the public shareholders of Hindustan Unilever Ltd”,it said.
HSBC Securities and Capital Markets India,the manager to the offer,said the completion of the open offer is subject to receipt of statutory approvals and details of the offer would be published on or before May 8.
As on the quarter ended March 31,2013,the promoters of Hindustan Unilever have a total stake holding of 52.48 per cent.
Market analysts termed the development as a good opportunity for investors to encash.
“The company is now doing well and they have found their growth track in businesses they are in. Investors should tender their shares at the open offer price,” Motilal Oswal Financial Services Director & Co Founder Raamdeo Agrawal said.
Unilever has been focusing on emerging markets,including India,China and Brazil,for its growth apart from Africa as growth has been slowing in developed markets like Europe.
The company’s Chief Operating Officer Harish Manwani had in March pointed out rural India as one of the biggest opportunities to tap for growth.
“Rural India is one of the biggest opportunities in the world because it is the place where 700 million people live,” Manwani had said.
Earlier in January this year,Unilever had decided to hike royalty fees from Hindustan Unilever. As per an agreement between Hindustan Unilever and Unilever for the provision of technology, trademark licences and other services,royalty payment by th Indian arm to its parent will increase to 3.15 per cent of turnover by the financial year ending March 31 2018.
Earlier,Hindustan Unilever was paying a royalty of 1.4 per cent of the turnover.
The agreement became affective from February 1,2013.
Shares of Hindustan Unilever were trading at Rs 583.10 apiece,up 17.18 per cent from their previous close on the BSE.
Unilever to raise stake in Hindustan Unilever in $5.4 bn offer
(Reuter): Anglo-Dutch consumer goods giant Unilever Plc will pay as much as $5.4 billion to raise its stake in its Indian unit,Hindustan Unilever,to up to 75 percent in a bet on fast-growing spending power in Asia’s third-largest economy.
Unilever said it would acquire up to 487 million shares,or 22.52 percent of the equity,of Hindustan Unilever in an open offer for 600 rupees a share,20.6 percent premium to Monday’s closing price.
The bid sent shares in Hindustan Unilever,India’s largest consumer goods maker,surging 20 percent to an all-time high on Tuesday morning.
“This represents a further step in Unilever’s strategy to invest in emerging markets and offers a liquidity opportunity at what we believe to be an attractive premium for existing shareholders,” Unilever’s chief executive,Paul Polman,said in a statement.
Indian law requires a minimum public shareholding of 25 percent for a publicly listed company.
The offer,payable in cash,is expected to begin in June 2013 and at $5.4 billion would be the largest equity offer ever in India.
HSBC is the manager to the offer.
“It makes a lot of sense to increase stake if the company is serious about staying here for long term,” said G. Chokkalingam,chief investment officer of Centrum Wealth Managers,which bought a small stake in Hindustan Unilever after the company reported results on Monday.
“In the long term,we expect there will be more incentive for the parent company to share technology to the Indian unit,introduce more brands here and raise market share,” he said.
Last November,GlaxoSmithKline Plc offered to buy an additional 31.8 percent stake in its India consumer products business for about $940 million.