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* GSK cashes in after 2018 Horlicks divestment
* Sells 5.7% stake in Unilever's India business
* GSK had folded Horlicks unit into Hindustan Unilever
(Updates with HUL share price, book runner details)
By Scott Murdoch and Anshuman Daga
HONG KONG/SINGAPORE, May 7 (Reuters) - GlaxoSmithKline
has sold its stake in Unilever's Indian
business for $3.4 billion, marking India's largest
block trade, which will help the British company in its goal of
reinvigorating its drug development pipeline.
The transaction GSK announced on Thursday comes as it
pursues a two-year programme to split into two entities after it
made costly bets on experimental cancer treatments and future
cell and gene therapies amid sluggish revenue growth.
The drugmaker is cashing in a 5.7% stake it took in
Hindustan Unilever, which produces everything from deodorant to
soup, as payment for the sale of its malted drink brand Horlicks
and other nutrition brands to Unilever in 2018.
The 133.77 million shares were offloaded on average for
1,905 rupees, according to a statement from GlaxoSmithKline.
Potential investors were earlier told the shares would be
sold in a range of 1,850 to 1,950 rupees, which was a
3%-8%discount to Wednesday's closing price of 2,010.20 rupees.
In the statement, GSK said it would now receive net proceeds
of 2.9 billion pounds ($3.59 billion) from the stake sale and
the sale of its Bangladesh business, which is expected to close
later this year.
It said the recent Hindustan Unilever share price gains led
to better than expected sale proceeds.
The deal eclipses the previous block trade record in India
when Daiichi Sankyo sold its $3.18 billion stake in Sun
Pharmaceuticals in April 2015, according to Refinitiv.
On a global basis, the Glaxo block trade will be the 10th
ever biggest, according to the data provider.
The largest ever block trade remains Naspers
selling $9.8 billion worth of Tencent stock in Hong
Kong in March 2018.
More than 100 institutional investors - 80% foreign
investors and 20% domestic Indian funds - participated in the
deal, a source with direct knowledge of the matter said.
Shares of Mumbai-listed Hindustan Unilever, which fell as
much as 5.38% to 1,902 rupees, recouped some of those losses to
close down 0.9% on Thursday. The company declined to comment on
the stake sale.
"One could argue that the stock was a tad overvalued at the
2,600 level, but at 1,900, it is reasonably valued," said Ajay
Bodke of Mumbai-based portfolio management service company
Prabhudas Lilladher.
"In an environment of heightened risk aversion, people
continue to look at sectors such as consumer staples, healthcare
and IT as safe havens."
HSBC Holdings, JPMorgan and Morgan Stanley
were the bookrunners on the deal.
MORE DIVESTMENTS
GSK's decision could also inject some momentum into India's
equity capital markets which have struggled in line with other
major financial markets as a result of the coronavirus pandemic.
There has been $6 billion worth of equity capital market
deals in India so far in 2020, down from $8.52 billion during
the same time list year, according to Refinitiv.
The data showed the rate of activity in 2020 is the slowest
since 2017.
In comparison, Hong Kong's equity capital markets have seen
$12.8 billion worth of activity this year.
Earlier this year, GSK launched a two-year programme to
split into two entities, separating the core prescription drugs
and vaccines business from an enlarged over-the-counter products
business that was merged with a Pfizer unit.
It is considering more divestments to fund the costs of the
separation.
Having sold travel vaccines to Bavarian Nordic for
up to 955 million euros ($1.03 billion)in October last year, the
British group is looking into shedding more assets, starting
with a review of its prescription dermatology business with
about 200-300 million pounds in annual sales.
($1 = 0.8074 pounds)
($1 = 0.9260 euros)
(Additional reporting by Sumeet Chatterjee in Hong Kong, Chris
Thomas and Chandini Monnappa in Bengaluru; Writing by Ludwig
Burger, Editing by Emelia Sithole-Matarise)
