Unilever offers $5.4 billion to raise stake in Indian unit

Tue Apr 30, 2013 3:05am EDT
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By Tony Munroe and Swati Pandey

MUMBAI (Reuters) - Anglo-Dutch consumer goods giant Unilever Plc offered to pay as much as $5.4 billion to raise its stake in its Indian unit, banking on fast-growing spending power in Asia's third-largest economy.

The offer to lift its share to as much as three-quarters of Hindustan Unilever Ltd, India's largest consumer goods maker, is the latest big corporate bet on long-term consumer demand in India despite economic growth at a decade low. It also reflects Unilever's focus on emerging markets amid weakness in the United States and Europe.

"This represents a further step in Unilever's strategy to invest in emerging markets and offers a liquidity opportunity at what we believe to be an attractive premium for existing shareholders," Unilever's chief executive, Paul Polman, said in a statement.

Unilever said it would buy an additional stake of up to 22.52 percent in Hindustan Unilever, of which it already owns just over half, in what would be the most valuable such offer in India.

The bid at 600 rupees per share - a 20.6 percent premium to Monday's closing price - sent shares in Hindustan Unilever surging as much as 20 percent to an all-time high early on Tuesday.

Several market watchers said investors might be unwilling to part with their shares at the offer price, which could force Unilever to settle for a smaller stake or raise its offer price.

"Many of the foreign funds or institutional investors hold the stock and when they play the India growth story they love to play it with HUL (Hindustan Unilever)," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance, which holds shares in the company.

"It is a very attractive stock and the quality of management is the best. So, given these factors, investors will not sell so easily," he said.   Continued...

A pedestrian walks past the Hindustan Unilever Limited (HUL) headquarters in Mumbai April 29, 2013. REUTERS/Danish Siddiqui