Unilever makes $5.4 bn offer to raise stake in India unit
Food giant Unilever announced a $5.4-billion offer to raise its stake
in its Indian subsidiary, eyeing explosive sales of branded consumer
items to the Asian country’s growing middle class.
The Anglo-Dutch firm made an offer to buy another 22.5 percent of
already majority-owned Hindustan Unilever (HUL) in a proposed deal that
would increase its control to 75 percent.
The offer, which saw HUL shares surge, is part of Unilever’s plan to
increase its presence in emerging markets such as India, where HUL’s
products such as skin fairness cream “Fair and Lovely” and Lux soaps are
best-sellers.
“This represents a further step in Unilever’s strategy to invest in
emerging markets,” said Paul Polman, Unilever’s chief executive, in a
statement.
Polman said the “long heritage” and the “significant” growth
potential of India’s economy make it a long-term priority for the group.
Unilever has proposed buying 487 million shares at 600 rupees per
share, a premium of 20.6 percent on the closing price on Monday, with
purchases to begin in June.
Analysts welcomed the move, which comes at a time when the consumer
goods sector remains bright despite an overall slowdown in the Indian
economy, which grew at an estimated five percent in last fiscal year.
“India is one of the largest consumption stories going around in the
world, which cannot be ignored,” said Anil Talreja, partner at
consultancy Deloitte India.
He said consumption demand from the vast and growing middle-class was
strong.
“India is a consumption-led story and Unilever wants to consolidate
its position and get a fair share of this consumption,” added Ankur
Bisen, vice-president in retail and consumer goods at consultancy
Technopak.
India’s retail sector is estimated to be worth $490 billion, of which
consumer goods constitute about 70 percent or $350 billion, according to
Bisen.
Last year, India’s Congress-led government relaxed legislation to
allow foreign retailers such as US supermarket giant WalMart to set up
shop in India and sell directly to Indian consumers to boost investment
from abroad.
On Monday, HUL reported a surprise 14.7 percent rise in net profit
for the January-March quarter to 7.87 billion rupees ($145 million) in
the three months to March, from 6.86 billion rupees a year earlier.
AFP |