The offer price represents a premium of about 26%

UK-headquartered multinational GlaxoSmithKline (GSK) has announced a voluntary open offer to hike its stake in its Indian pharmaceutical operations, GlaxoSmithKline Pharmaceuticals Ltd. (GSK Pharma), from 50.7 per cent to 75 per cent at Rs. 3,100 per share.

A statement from GSK said the offer is to acquire up to 20.6 million shares, representing 24.3 per cent of the total outstanding shares of the Indian company.

The offer price of Rs. 3,100 per share represents a premium of about 26 per cent to the company’s closing price on the National Stock Exchange (NSE) on December 13, 2013. The potential value of the transaction at the offer price is about Rs. 6,400 crore ($1 billion or 629 million pounds). The transaction 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, GSK said in a statement.

GSK Pharma makes and distributes pharmaceuticals and vaccines across multiple therapeutic areas . It employs more than 5,000 people and reported a Rs. 2,600 crore-plus turnover in calendar 2012. David Redfern, Chief Strategy Officer, GSK said, “For GSK, this transaction will increase exposure to a strategically important market and for our Indian pharmaceuticals subsidiary’s shareholders, we believe it offers a good liquidity opportunity at an attractive premium.”

“GSK has a proud heritage in India,” said Mr. Redfern, adding, “Today’s announcement is a further demonstration of our long-term commitment to the country, having increased our holding in our consumer business earlier this year and more recently committed to a significant manufacturing investment.”

Gaurang Shah, VP – Research, Geojit BNP Paribas Financial Services felt the offer price was a very good one. “It reflects the confidence of the parent company in the long-term India growth story. Even though the Indian pharmaceutical market is fragmented, GSK has the multinational edge and a very strong balance sheet.”

With this deal, GSK would spend almost $2 billion in hiking its shareholding in its Indian subsidiaries in the span of a year. In February 2013, GSK hiked its stake in its other listed Indian subsidiary GSK Consumer Healthcare to 72.5 per cent from 43 per cent at around Rs. 4,800 crore ($ 900 million). Exactly a month ago, GSK said it would invest Rs. 864 crore in GSK Pharma’s manufacturing facility. On the BSE, the shares of GSK Pharmaceuticals scaled a 52-week high of Rs. 2,952 before closing up Rs. 459 (18.6 per cent) at Rs. 2,927.4.

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