Food giant Unilever yesterday announced a US$5.4 billion offer to raise its stake in its Indian subsidiary, eyeing explosive sales of branded consumer items to the Asian country’s growing middle class.
The Anglo-Dutch firm made an offer to buy another 22.5 percent of already majority-owned Hindustan Unilever (HUL) in a proposed deal that would increase its control to 75 percent.
The offer, which saw HUL shares surge, is part of Unilever’s plan to increase its presence in emerging markets such as India, where HUL’s products such as skin fairness cream “Fair and Lovely” and Lux soaps are best-sellers.
“This represents a further step in Unilever’s strategy to invest in emerging markets,” Unilever chief executive Paul Polman said in a statement.
Polman said the “long heritage” and the “significant” growth potential of India’s economy make it a long-term priority for the group.
Unilever has proposed buying 487 million shares at 600 rupees per share, a premium of 20.6 percent on the closing price on Monday, with purchases to begin next month.
Analysts welcomed the move, which comes at a time when the consumer goods sector remains bright despite an overall slowdown in the Indian economy, which grew at an estimated 5 percent in last fiscal year.
“India is one of the largest consumption stories going around in the world, which cannot be ignored,” said Anil Talreja, partner at consultancy Deloitte India.
He said consumption demand from the vast and growing middle-class was strong.
Last year, India’s Congress-led government relaxed legislation to allow foreign retailers such as US supermarket giant Wal-Mart to set up shop in India and sell directly to Indian consumers to boost investment from abroad.
On Monday, HUL reported a surprise 14.7 percent rise in net profit for the January-March quarter to 7.87 billion rupees (US$145 million) in the three months to March, from 6.86 billion rupees a year earlier.
Expectations had been for a profit of 7.5 billion rupees.
Shares in HUL — whose sales are watched by analysts as a barometer of consumer demand — were trading at 578.55 rupees later in morning trade, up 16.27 percent.