GlaxoSmithKline to invest Rs 5,220 cr in India subsidiary
New Delhi: UK-based healthcare major GlaxoSmithKline Monday announced plans to infuse about Rs 5,220 crore in its Indian subsidiary GSKCH by increasing stake to 75 percent from 43.2 percent at present.
GlaxoSmithKline will come out with an open offer to buy additional 31.8 percent stake at a price of Rs 3,900 a share.
The open offer is at a premium of about 28 percent to GlaxoSmithKline Consumer Healthcare's (GSKCH) closing share price on the NSE last Friday, the company said.
The offer price is 28.15 percent higher than Friday's closing price of Rs 3,043.2 a share on BSE. GlaxoSmithKline is likely to launch the offer in January next year.
Markets cheered the announcement as GSKCH shares soared 20 percent to Rs 3,651.80 on BSE.
"GlaxoSmithKline has announced a voluntary open offer to increase its stake in its publicly-listed consumer healthcare subsidiary in India (GlaxoSmithKline Consumer Healthcare), from 43.2 percent to up to 75 percent at a price of Rs 3,900 per share," the company said in a statement.
The potential total value of the transaction at the offer price is approximately Rs 5,220 crore, it added.
The offer made pursuant to the rules of the Securities and Exchange Board of India, is to acquire up to 13,389,410 shares, representing 31.8 percent of the total outstanding shares of the Indian company, it added.
GSK Chief Strategy Officer David Redfern said: "This transaction represents a further step in GSK's strategy to invest in the world's fastest growing markets and, we believe, it offers a liquidity opportunity at an attractive premium for existing shareholders."
The transaction, which will be funded through GSK's existing cash resources, will be earnings neutral for the first year and accretive thereafter and will not impact expectations for the group's long-term share buyback programme, the company said.
As on quarter ended September 2012, the foreign promoter holding of GSKCH is 43.2 percent, while the public shareholding is at 56.84 percent.
Securities regulations in India require a minimum public shareholding of 25 percent for a company to maintain a public listing in the country.
GSK's Consumer Healthcare business in India generated over Rs 2,800 crore turnover in the financial year ended 31 December, 2011. The company employs nearly 3,200 people.
GSK's primary areas of business are in three verticals-- pharmaceuticals, vaccines and consumer healthcare.