GlaxoSmithKline (GSK) has announced plans to sell its Horlicks malted drinks business segment. The move is triggered by GSK’s need to fund a $13 billion buyout of the remaining stake in its consumer healthcare joint venture with Novartis.
According to the company:
“GSK is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction and to drive increased focus on over-the-counter and oral health categories.”
The company is now ready to offload part of its consumer nutrition portfolio to focus on its over-the-counter and oral healthcare brands such as Sensodyne toothpaste and Eno.
Coca-Cola, Nestle, and Kraft Heinz are said to be among the companies bidding for the 145-year-old brand, with Coca-Cola said to be the front-runner with a £3bn (US$4bn) offer.
Sale of its drinks segment in Nigeria
Recall that GSK Nigeria, in an attempt to re-align with the global strategy on pharmaceutical and consumer healthcare products, had agreed to a non-binding offer from Suntory to purchase its drinks business (Lucozade and Ribena).
The Nigerian subsidiary entered into a 10-year agreement with Suntory to continue the drinks business such that Suntory provides the concentrates whilst GSK bottles, distributes and markets the drink products (Lucozade and Ribena).
The deal also involved the sale of two-thirds of the Agbara site, which holds the factory plants & machinery as well as distribution facilities directly in-use for the production of the drinks.
In its financial statements for the full year 2017 ended 31 December, 2017, saw revenue growth from ₦14.38 billion in 2016 as against ₦16.09 billion in 2017. The profit before tax also increased from ₦185 million in 2016 to ₦1.12 billion in 2017.
Also in its Q1 2018 financial statements for the period ended 31st March 2018, the company recorded a revenue growth from ₦3.8 billion in Q1 2017 to ₦4.2 billion in Q1 2018.
Payment of special dividend to shareholders
The management of the company recently opted to pay a special dividend of ₦7.10 per share and an ordinary dividend of ₦0.40 per share to its shareholders. The total cash value of the special dividend is a whopping ₦8.4 billion.
The reason behind the company’s 2017 financial year dividend increase is due to a supposed “growth in the GSK reserve level over the past few years”, as well as profit accumulation resulting from the company’s recent divestment of its drinks business.
Horlicks was invented in 1873 by the British-born brothers William and James Horlick, who had emigrated to the US. They opened a factory in Slough in 1908, and Horlicks became popular as a lightweight, non-perishable, and high-calorie food supplement.
About the company
GlaxoSmithKline Plc was formed in 2000 as a result of a merger between Glaxo Wellcome Plc and SmithKline Beecham Plc. It was incorporated in Nigeria on 23rd June, 1971, and commenced business on 1st July, 1972, under the name Beecham Limited. The Company was quoted on the Nigerian Stock Exchange (NSE) in 1977. The shares of the company are currently trading at ₦19.20 with a one year return of 17.56%.