GlaxoSmithKline has sold its stake in Unilever's Indian business for $3.4 billion, marking India's largest block trade, which will help the British company in its goal of reinvigorating its drug development pipeline.
The transaction GSK announced on Thursday comes as it pursues a two-year programme to split into two entities after it made costly bets on experimental cancer treatments and future cell and gene therapies amid sluggish revenue growth.
The drugmaker is cashing in a 5.7% stake it took in Hindustan Unilever, which produces everything from deodorant to soup, as payment for the sale of its malted drink brand Horlicks and other nutrition brands to Unilever in 2018.
The 133.77 million shares were offloaded on average for 1,905 rupees (€23.28), according to a statement from GlaxoSmithKline.
Potential investors were earlier told the shares would be sold in a range of 1,850 to 1,950 rupees, which was a 3% - 8%discount to Wednesday's closing price of 2,010.20 rupees.
In the statement, GSK said it would now receive net proceeds of £2.9 billion (€3.32 billion) from the stake sale and the sale of its Bangladesh business, which is expected to close later this year.
It said the recent Hindustan Unilever share price gains led to better than expected sale proceeds.
The deal eclipses the previous block trade record in India when Daiichi Sankyo sold its $3.18 billion stake in Sun Pharmaceuticals in April 2015, according to Refinitiv.
On a global basis, the Glaxo block trade will be the 10th ever biggest, according to the data provider.
The largest ever block trade remains Naspers selling $9.8 billion worth of Tencent stock in Hong Kong in March 2018.
More than 100 institutional investors - 80% foreign investors and 20% domestic Indian funds - participated in the deal, a source with direct knowledge of the matter said.
Shares of Mumbai-listed Hindustan Unilever, which fell as much as 5.38% to 1,902 rupees, recouped some of those losses to close down 0.9% on Thursday. The company declined to comment on the stake sale.
"One could argue that the stock was a tad overvalued at the 2,600 level, but at 1,900, it is reasonably valued," said Ajay Bodke of Mumbai-based portfolio management service company, Prabhudas Lilladher.
"In an environment of heightened risk aversion, people continue to look at sectors such as consumer staples, healthcare and IT as safe havens."
HSBC Holdings, JPMorgan and Morgan Stanley were the bookrunners on the deal.
GSK's decision could also inject some momentum into India's equity capital markets which have struggled in line with other major financial markets as a result of the coronavirus pandemic.
There has been $6 billion worth of equity capital market deals in India so far in 2020, down from $8.52 billion during the same time list year, according to Refinitiv.
The data showed the rate of activity in 2020 is the slowest since 2017.
In comparison, Hong Kong's equity capital markets have seen $12.8 billion worth of activity this year.
Earlier this year, GSK launched a two-year programme to split into two entities, separating the core prescription drugs and vaccines business from an enlarged over-the-counter products business that was merged with a Pfizer unit.
It is considering more divestments to fund the costs of the separation.
Having sold travel vaccines to Bavarian Nordic for up to €955 million ($1.03 billion)in October last year, the British group is looking into shedding more assets, starting with a review of its prescription dermatology business with about £200-£300 million in annual sales.