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GSK to spend $1 bn to hike stake in India unit

GSK is planning to hike its stake in the Indian unit to up to 75 per cent from 50.67 per cent.

Written by ENS Economic Bureau | Mumbai | Published: December 17, 2013 2:08:11 am

British pharma major GlaxoSmithKline Plc has decided to spend around $1 billion (Rs 6,400 crore,or £629 million) to raise its stake in its Indian unit,GlaxoSmithKline Pharmaceuticals,through a voluntary open offer.

GSK is planning to hike its stake in the Indian unit to up to 75 per cent from 50.67 per cent. Following the announcement,GSK Pharma shares surged 19.59 per cent to a 52-week high of Rs 2,952 before closing at Rs 2,927.40,up 18.60 per cent,on the BSE. This offer is about 26 per cent premium over the closing price on Friday.

The British firm will acquire 2.06 crore shares of face value Rs 10 each,representing 24.3 per cent of the total outstanding shares of the Indian firm,at Rs 3,100 per share,GSK said in a statement. As per Sebi regulations,promoters of listed companies can hold up to a maximum 75 per cent stake. If the promoter’s stake rises beyond 75 per cent,the company has to be de-listed from the bourse.

GSK said it will maintain its holding at 75 per cent as mandated by Sebi regulations of 25 per cent public float.

Anglo-Dutch consumer goods company Unilever in July completed a deal to raise its stake in the Indian unit Hindustan Unilever to 67.28 per cent from 52.48 per cent in a deal worth about $3 billion.

In February,GSK hiked its stake in its publicly-listed Indian consumer healthcare subsidiary,GlaxoSmithKline Consumer Healthcare,to 72.5 per cent from 43.2 per cent for $901 million.

With the second deal announced on Monday,GSK is set to spend close to $2 billion in roughly a year to increase its holdings in two listed Indian companies,which is reportedly its biggest incremental investment in any country in the year.

David Redfern,chief strategy officer,GSK said: “For GSK,this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary’s shareholders we believe it offers a good liquidity opportunity at an attractive premium.”

According to the UK firm,the transaction will be funded through GSK’s existing cash resources,will be earnings neutral for the first year and accretive thereafter and will not impact expectations for the group’s long-term share buyback programme.

“The buyback of the shares is at an attractive price,much above the current market price and is a strong commitment from the management’s side towards the listed entity. The deal will also see inflows into the country,” said BSE broker Pawan Dharnidharka.

Open offer

* GlaxoSmithKline Plc is planning to hike its stake in the Indian unit,GlaxoSmithKline Pharmaceuticals,to up to 75% from 50.67%

* It will spend around $1 billion (Rs 6,400 crore) to raise its stake through a voluntary open offer

* GSK Pharma shares surged 19.59 per cent to a 52-week high of Rs 2,952 before closing at Rs 2927.40,up 18.60%,on the BSE.

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