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The malted milk hot drink brand Horlicks is about to get yet another owner as British pharma giant GlaxoSmithKline has decided to sell it.

According to a press release by GSK, the decision has come about because GSK has to buy USD 13 billion worth of shares remaining in its consumer healthcare joint venture with Novartis. The company wants to divest from its consumer nutrition portfolio, which would help it to zoom in on its over-the-counter and oral healthcare brands like Sensodyne and Eno. For the sale an “assessment of GSK’s 72.5% shareholding” in GlaxoSmithKline Consumer Healthcare, its Indian subsidiary, will be undertaken.

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“As a result of the transaction, GSK’s shareholders will capture the full value of GSK’s Consumer Healthcare growth. With category-leading Power Brands, increased focus on science-based innovation and improved operational efficiencies, GSK Consumer Healthcare is well positioned to deliver sales growth, operating margin improvements and attractive returns. The business expects operating margins to approach ‘mid-20’s’ percentages by 2022 at 2017 CER,” the release said.

Through the transaction, GSK expects to strengthen operational cash flows, and support GSK’s trust in delivering its plans for 2020, while investing effectively in the Group’s other priorities.

Emma Walmsley, Chief Executive Officer, GSK said, “The proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world’s leading Consumer Healthcare businesses. For the Group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”

Since Novartis is treated as a related party of GSK 36.5% interest in the Joint Venture, the transaction becomes dependent on shareholders’ approval. As such, GSK’s board will try to recommend that the vote swings in the favor of an approval. However, conditions, such as provisions allowing the recommendation to be taken off because of ‘fiduciary duties’ or government prohibitions, might yet stop the buyout from taking place.

Horlicks and its various subsidiaries add up to almost 75% turnover of GSK Consumer Healthcare, which is GSK’s arm in India. Most of Horlicks and GSK’s nutritional products sales come from India. Hence, the impact is likely to be seen on the GSK’s INR 4,421 crore (USD 680 million) business in India.

A 140-year-old company, Horlicks’ market share in the INR 5500 crore-Indian health drink segment is 65% by volume and 56.3% by value as of March 2017. Counting Bournvita (Mondelez), Complan (Kraft-Heinz), and Milo (Nestle) as its competitors, Reports say, Nestle, Kraft-Heinz, and Unilever might lunge for the brand.

Horlicks came to India via British soldiers during the World War 2. While initially, it was imported from Slough, England, an bottled in India, regulated import policies in 1955 changed this system. In 1958, with support from Maharana Pratap Singh, King of Nabha, the first Horlicks factory in India opened in Punjab under the name, Hindustan Milkfood Manufacturers. In 1969, Horlicks was sold to Beecham, which later merged with SmithKline and became SmithKline Beecham, and in 1989, in a merger with Glaxo, it became GSK.


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