Hindustan Unilever Ltd (HUL) today surged as much as 11 per cent to a new high of Rs 2,399. In comparison, benchmark index Sensex was up about 6 per cent. HUL is a handful of stocks that have been able to escape the market correction over the past few weeks.
HUL has announced the completion of the merger of GlaxoSmithKline Consumer Healthcare Ltd (GSKCH) with itself, almost 15 months after the announcement of the mega-deal. The board of HUL also gave its approval to the acquisition of the Horlicks brand from GSK for Rs 3,045 crore as part of an option available in the original agreement made between HUL and GSK. Besides, other health food drinks brands of GSKCH Boost, Maltova and Viva – would come to HUL’s portfolio by virtue of the merger, making it a leading player in the segment.
‘HUL, with the closure of the merger of Glaxosmithkline Consumer Healthcare with itself, is set to become the biggest food company in India. Merger positives according to us are (i) EPS accretion of 4.5 per cent (factored in FY21 numbers); (ii) Access to low penetrated (approx 23-25 per cent) and high scope of premiumisation health food drinks portfolio; (iii) 800-1,000 bps margin expansion potential in GSK’s portfolio (partly achieved, more room ahead); (iv) Opportunity to deepen penetration in the chemist and other channels of future; (v) Potential tax benefit from the acquisition of the Horlicks brand as well as amortisation of goodwill on the merger; and (vi) Possibility of HUL becoming top revenue contributor to Unilever by approx FY27,’ Edelweiss Securities said in a note.