Business Case Studies,Corporate Governance & Business Ethics Case Study, HUL Delisting?

Code : COS0112

Year : 2015

Case Length : 17pages

Industry :FMCG

Organization:Unilever,Hindustan Unilever.

Period : 2012-2013

Region :

Teaching Note: Available

Structured Assignment : Not Available

Countries : India, Euro zone, US

Introduction:On April 30, 2013, Unilever Plc (Unilever), the Anglo-Dutch consumer goods gaint, announced a voluntary offer to buy back 22.52 per cent stake in Hindustan Unilever Limited (HUL), its public listed subsidiary in India. Unilever announced that it would acquire 487,004,772 shares, representing 22.52% of the total outstanding shares of HUL, at Rs. 600 per share to increase its stake in HUL from 52.48% to 75% (Refer to Exhibit-1). Subject to regulatory clearance, the offer period would begin on June 21, 2013, and close on July 4, 2013. Unilever appointed HSBC as manager for the open offer. Securities regulations in India require a minimum public share holding of 25% for a company to maintain a public listing in the country. According to Unilever, the open offer was offered at a premium of approximately 29.5% over the mandatory floor price required under Indian regulations, a premium of 26.0% to HUL’s previous one month’s average trading share price ( March 1, 2013 – March 31, 2013) on the National Stock Exchange of India Limited . The potential total value of the transaction at the offer price (assuming full acceptance) was approximately RS. 292.2 billion or €4.1 billion ($5.4 billion). According to Unilever’s 2012 annual report, Unilever had a strong free cash flow of € 4.33 billion (Refer to Exhibit 2) at the end of the year 2012. After the announcement of the buyback offer, the HUL share price rose by about 20 per cent to Rs. 597, a lifetime high.