The Lemon Fool

Hi I have a Noob question, over on the HYP board there is a discussion about the sale of GSK's Horlicks business and it has left me with a question about how it works when you have a dual listed company. the original thread is viewtopic.php?f=15&t=14974

The article mentions that GSK will be selling assets, but then points out that the Indian business is listed on the Indian Stock Market, does this mean that the Indian business is not owned by people who own GSK.L shares? (Other than the %age of shares that GSK own themselves)

I am assuming (Always a bad idea) the way it works is that if GSK was to sell it's entire Indian business they would get 80% (or so, I can't remember what % it said they owned) and 20% would go to the other shareholders (whoever they are) but if they were to sell one element which makes up a large percentage of the business, such as Horlicks would this only be part of the Indian business or part of the global business as well? I guess the question is if they sell a fundamental part of a business that is dual listed would the money become available centrally to be used or would only 80% of it come back with the other 20% resting in India?

Not sure if that makes any sense? I have tried googling what it means but mostly just get details on the pros and cons of dual listing fro the business and nothing on the practical results to investors.

GlaxoSmithKline India is a separately listed company, with GlaxoSmithKline owning 72.5% of its shares. So GlaxoSmithKline shareholders indirectly own 72.5% of GlaxoSmithKline India and if it was ever sold then 72.5% of the total proceeds would go to GlaxoSmithKline (the rest goes to the minority shareholders). However, as far as I can tell the entire Indian business is not for sale, it's only the nutrition business, so GlaxoSmithKline India would remain a quoted company and receive 100% of the proceeds.

Given that the Horlicks brand is owned by GlaxoSmithKline it is possible that GlaxoSmithKline may have an additional claim over some of the sale proceeds (e.g. through licencing terms).

This is speculation on my part; in some cases a product is made under licence where the manufacturer doesn't hold all of the rights to the product. For example, in the UK Persil washing powder is made and sold by Unilever but they make it under licence from its owner Henkel (which makes and sells Persil in most other countries).

ln cases like these there are usually clauses in the licencing contract either restricting the ability to sell the licence to a third party or giving the owner of the licenced product a cut of any proceeds of a sale (and the ability to veto a sale).

This is similar to the sell-on clauses in some football transfer fees where the selling club gets a cut of any fee if the buying club subsequently sells that player to another club.

Incidentally Unilever has a separately quoted Indian subsidiary; Hindustan Unilever. I believe that it owns 67% of the subsidiary. It would probably make more sense operationally for the purchased businesses to come under the Hindustan Unilever umbrella.

Awesome, thanks.

That is what I had assumed. So they are in effect 100% different companies just that GSK is the major shareholder, and I assume were involved in setting them up at somepoint.

So if GSK did want the money centrally they would need to make GSK India pay it out as a dividend and then the 72% would go onto their balance sheet?

Not that I am saying this is what they will do, just trying to understand how it would work.

evilbungle wrote:....
So if GSK did want the money centrally they would need to make GSK India pay it out as a dividend and then the 72% would go onto their balance sheet?

...

One hopes that GSK management has planned carefully for the money.

If they wish to invest it in their other Indian businesses or acquisitions, that's one thing.

If they want to extract the $3bn proceeds from India, this may attract unwelcome attention from the Indian Government.

77ss wrote:

evilbungle wrote:....
So if GSK did want the money centrally they would need to make GSK India pay it out as a dividend and then the 72% would go onto their balance sheet?

...

Further to my earlier post, an Indian article from May points out some of the tax issues:

https://economictimes.indiatimes.com/in ... 297665.cms