The Anglo-Dutch consumer goods major Unilever plans to pay up to $5.4 billion (about Rs 29,300 crore) to hike its stake in its Indian subsidiary,Hindustan Unilever Ltd to as much as 75 per cent from 52 per cent at present.
The deal,the largest single investment in the Indian consumer goods sector,entails the purchase of 48.7 crore HUL shares by Unilever at an offer price of Rs 600 per share. Reacting to the announcement made to stock exchanges before the markets opened for trading,HUL shares jumped by 20 per cent on Tuesday to hit a high of Rs 597 before closing at Rs 583.6.
The open offer is by far the biggest in the Indian capital markets. Cairn Indias open offer in 2011 comes in as the second highest at Rs 13,361 crore,followed by Japanese pharma major Daiichi Sankyos purchase of 20 per cent stake in Ranbaxy Laboratories at Rs 6,818 crore in 2008 and Siemens open offer of Rs 6,233 crore in 2011.
The Unilever offer is in line with the announcements made by ABB (in 2010),Siemens (in 2011) and Glaxo Smithkline Consumer (in 2013),whereby foreign promoters have ramped up their holdings in their Indian subsidiaries.
The open offer that represents 22.52 per cent of the share capital of the company is slated to hit the market in the coming weeks as the company has stated in its announcement that further details to the open offer will be published on or before May 8,2013.
The move fits into Unilevers strategy of increasing its presence in fast-growing markets. Emerging markets,which make up 57 per cent of Unilevers turnover,have contributed double-digit growth in recent quarters.
That contrasts with rivals who have been slower to move into fast-growth regions. Unilevers main household products rival Procter & Gamble has been in retrenchment mode,while French major Danone is the most exposed among the big food groups to the euro zone crisis.
The long heritage and great brands of Hindustan Unilever,and the significant growth potential of a country with 1.3 billion people,makes India a strategic long-term priority for the business, said Unilever CEO Paul Polman.
On Monday,HUL,whose flagship brands include Rin bar soap,the Lifebuoy range and Lakme skincare products,beat expectations with a 15 per cent increase in earnings in January-March,2013.
While the promoter company (Unilever) currently holds 52.48 per cent in HUL,a successful subscription to the entire offer will take its holding in the company to 75 per cent. HSBC Securities and Capital Markets has been appointed as the manager to the open offer.
Market players say that the price is very attractive and retail investors should look to tender their shares at this price.
With this 20 per cent kind of premium it becomes quite a good sell. But for a very very long-term investor,who has gone through the pain of holding through 2001 to 2010 period,it would be hold, said Raamdeo Agrawal,co-founder,Motilal Oswal Financial Services.
* Unilever plans to hike its stake in HUL to as much as 75 per cent from 52 at present
* HUL shares jumped by 20% on Tuesday to hit a high of Rs 597 before closing at Rs 583.6
* The open offer is by far the biggest in the Indian capital markets