The deal between Hindustan Unilever (HUL) and GSK Consumer was struck in 2018, while HUL completed its merger with GSK Consumer on April 1, 2020. According to the deal, HUL acquired brands which were under the ownership of GSK Consumer like Boost, Maltova and Viva. While GSK Consumer parent GlaxoSmithKline Pte and Horlicks Limited had received shares of HUL ie. 5.69% stake in the company. After the issue of these shares, HUL's parent company Unilever Ple’s stake was reduced to 61.9% from 67.19% earlier. Further, GlaxoSmithKline Ple (GSK) had already mentioned at the time of the deal that it intends to monetize its holding sooner or later taking into account market condition. Accordingly it is likely to sell its 5.69% stake via block deals at a price band of Rs 1,850 - 1,950 per share.
View: We believe the deal was beneficial for both the companies. However, we believe HUL would face challenges in the near term due to ongoing weak market condition as well as subdued quarterly numbers. While long term perspective of HUL remains bright, as it would regain strength once things stabilize. Its long-term growth will be driven by improvement in demand, strong product portfolio and healthy balance sheet. Hence, investors can buy and accumulate the stock on dips.
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