Anglo-Dutch consumer goods giant Unilever Plc will pay as much as $5.4 billion (Rs 29,248.06 crore) to raise its stake in its Indian unit, Hindustan Unilever, to up to 75 per cent 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 per cent of the equity, of HUL in an open offer for Rs 600 a share, a 20.6 per cent premium to Monday's closing price. The offer values the stock at 33.3x FY14 earnings.
Anglo-Dutch consumer goods giant Unilever Plc will pay as much as $5.4 billion (Rs 29,248.06 crore) to raise its stake in its Indian unit, Hindustan Unilever, to up to 75 per cent 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 per cent of the equity, of HUL in an open offer for Rs 600 a share, a 20.6 per cent premium to Monday's closing price. The offer values the stock at 33.3x FY14 earnings.
Anglo-Dutch consumer goods giant Unilever Plc will pay as much as $5.4 billion (Rs 29,248.06 crore) to raise its stake in its Indian unit, Hindustan Unilever, to up to 75 per cent 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 per cent of the equity, of HUL in an open offer for Rs 600 a share, a 20.6 per cent premium to Monday's closing price. The offer values the stock at 33.3x FY14 earnings.
The bid sent shares in HUL surging 20 per cent to an all-time high of Rs 597 on Tuesday morning. The Unilever stock closed 0.38 per cent higher on the London Stock Exchange on Monday.
Indian law requires a minimum public shareholding of 25 per cent for a 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.
Terming the offer a "huge positive for India's FMCG market", independent market analyst Sanjiv Bhasin said the offer shows the confidence Unilever has in the Indian market.
"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 HUL 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.
The open offer comes a day after the company pleasantly surprised the markets with better than expected volumes growth of 6.3 per cent in the fiscal fourth quarter ended March 31, 2013.
HUL shares, which have fallen 11 per cent since the start of 2013 compared with a 3 per cent rise in the consumer sector's benchmark BSE FMCG index, rose as much as 6 per cent after the company announced its fourth quarter results on Monday.
The company trades at 28.8 times its 12-month forward earnings, compared with 28.4 times for ITC, 34.7 times for Nestle and 34.6 times for Godrej Consumer, Thomson Reuters Starmine Smart Estimate showed.
HUL, valued at Rs. 99,558 crore, makes popular brands including skin creams Fair and Lovely, Sunsilk shampoo, Lux soap and Kissan ketchup.
India's largest consumer goods maker is expected to intensify a price war against lesser-known detergent and skincare brands this year as it seeks to win back India's increasingly thrifty shoppers and reverse four consecutive quarters of slowing sales.
High inflation, meagre urban salary raises and drought in the agricultural heartland reduced incomes in Asia's third-largest economy last year and heated up the competition in the $13 billion (Rs. 70,521 crore) consumer goods sector.
With inputs from Reuters
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