To strengthen its position in emerging markets, FMCG giant Unilever Plc plans to increase it stake in its Indian unit, Hindustan Unilever (HUL). The company, through an open offer, plans to increase its shareholding from 52.48 per cent to 75 per cent.
The Anglo-Dutch firm has offered to pay over Rs 29,000 crore, at Rs 600/share, for picking up more shares in HUL. This is the biggest since Cairn India’s open offer of Rs 13,000 crore.
In a statement, Unilever’s CEO Paul Polman said the offer is at an attractive premium for existing shareholders. The company intends to acquire up to 48.70 crore shares representing 22.52 per cent of the total outstanding shares of HUL. Securities regulations in India require a minimum public shareholding of 25 per cent for a company to maintain a public listing in the country.
The offer, payable in cash, represents a premium of around 29.5 per cent over the mandatory floor price required under Indian regulations, a premium of 26 per cent to HUL’s last one month’s average trading share price and 25 per cent to the last one week’s average trading price on the National Stock Exchange.
Subject to regulatory clearance, the offer period is expected to begin in June. Payment will take place shortly after the close of the offer. Several analysts said that investors might like to hold on to the shares at the offer price. Nitin Mathur at brokerage Espirito Santo said the company’s move might be a step further to de-list its Indian unit from the bourses.
Raamdeo Agrawal, Director, Motilal Oswal Financial Services, said the 20 per cent premium made it quite a good sell. But for a very long-term investor, who has gone through the pain of holding through the 2001-2010 period, it would be ‘hold’.
“The company is now doing well and they have found their growth track in businesses they are in. Investors should tender their shares at the open offer price,” he said, adding that post offer, the prices might correct back to about Rs 525.
The announcement helped push up the HUL share by 20 per cent to touch a one-year high of Rs 597 on the BSE on Tuesday.