GSK raises Indian arm stake to 72.5% with Rs.4,800-cr buyback

Written by feBureau | Mumbai | Updated: Feb 6 2013, 06:39am hrs
International consumer healthcare player, GlaxoSmithKline raised its stake in its listed Indian subsidiary, GlaxoSmithKline Consumer Healthcare, to 72.5% from 43.2%, the company said on Tuesday.

At the conclusion of the company's voluntary open offer to buy back its shares from the open market on January 30, 2013, the shareholders have tendered 1.23 crore shares representing 29.3% of the shares outstanding.

The stake increase in Indian arm is deemed as part of the company's strategy to invest in the world's fastest growing markets where the company is well established and its leading product, Horlicks, is considered a household brand.

It is a significant vote of confidence in the long-term growth prospects of our Consumer Healthcare business in India, said David Redfern, chief strategy officer at GSK, commenting on the outcome of the open offer that has increased the company's exposure to a key emerging market.

The transaction, expected to be valued at R4,800 crore at the offered price of R3,900 per share, while depicts the success of the open offer, is a tad lower than the dealing expected when the company announced its plan to buy back shares in November 2012. The offer was managed by HSBC Securities and Capital Markets.

On Tuesday, shares of Gsk healthcare dipped 2% or R72 to R3,740.55 on the BSE, but were still up 23% from November 26, 2012, when the open offer was announced.

Back then, the UK-based parent company, along with Horlicks and Singapore-based GlaxoSmithKline, stated its plans to raise its stake in the Indian subsidiary to 75% by buying an additional 31.8% stake through an open offer of R3,900 per share, with the transaction amounting to R5,222 crore. Following the announcement, the GSK stock rallied 20% to R3,651.8 and touched the upper circuit on November 26,2013.

After the declaration of the offer, some analysts believed that the secondary market prices would rally past the offer price, if investors expect a revision of the offer price. Meanwhile, the shares rallied as high as R3,886.05 during the intra-day trade on January 11, 2012, but stayed shy of overtaking the offer price.

About a week before the commencement of the open offer on January 17, 2012, it was reported that certain financial institutions, including Life Insurance Corporation (LIC), had declined to participate in the open offer, citing unattractive offer price.

According to a note by ICICI Securities, due to expected low participation by institutions like LIC and Arisaig partners, the acceptance ratio of the offer, which stood at 56% at the time of the announcement, could rise to 75%. The acceptance ratio indicates the number of shares accepted for every 100 shares tendered for the buyback.

As per the latest, shareholding pattern, institutional investors held 31.5% of the outstanding shares, with Arisaig Partners and LIC both holding 5.01% and 3.97% stakes, respectively.