Unilever to raise stake in HUL by offering $5.4 b

Anglo-Dutch consumer goods giant Unilever Plc offered to pay as much as $5.4 billion to raise its stake in its Indian unit Hindustan Unilever, 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 per cent 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 Rs 600 per share — a 20.6 per cent premium over Monday's closing price — sent shares in Hindustan Unilever surging as much as 20 per cent 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.

On Monday, HUL beat expectations with 15 per cent increase in March quarter earnings. The offer, payable in cash, is expected to begin in June. In a similar deal in November, UK-based GlaxoSmithKline Plc offered to buy a further 31.8 per cent stake in its Indian consumer products business for about $940 million.