GlaxoSmithKline (GSK) announced its intent to increase ownership in GlaxoSmithKline Consumer Healthcare Ltd, its publicly-listed subsidiary in India, from 43.2% to up to 75% and, in a separate release, announced an agreement in principle on a proposal to increase ownership in GlaxoSmithKline Consumer Nigeria PLC from 46.4% to 80%. The offers represent the maximum possible stake allowed while maintaining a public listing in the respective countries and are part of GSK’s strategy to invest in emerging markets.
“GSK Consumer Healthcare is a well-established business in India, and its leading product, Horlicks, is an iconic household brand. This transaction represents a further step in GSK's strategy to invest in the world's fastest growing markets and, we believe, offers a liquidity opportunity at an attractive premium for existing shareholders," said David Redfern, GSK chief strategy officer, in the press release.
The transaction in India, valued at up to approximately $940 million, 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 program. Subject to regulatory clearance, the offer period is expected to begin in January 2013.
The board of directors of GSK Nigeria unanimously approved the proposal and intends to recommend it to shareholders. Under the terms of the deal, GSK would acquire approximately 321 million shares in the company on a pro rata basis from public shareholders for a total value of almost $98 million. The transaction in Nigeria will be funded through GSK’s existing cash resources, will be modestly earnings accretive immediately, and will not impact expectations for the Group’s long-term, share-buyback program. The proposal will be subject to requisite shareholder, regulatory, and court approvals including those of the Nigerian Stock Exchange and the Securities and Exchange Commission.