Unilever will acquire up to 487 million shares, or 22.52 per cent of the equity, of HUL in an open offer for Rs 600 a share, which is a 20.6 per cent premium to the stock's closing price on Monday.
The offer, payable in cash, is expected to begin in June 2013 and at $5.4 billion would be the largest single investment in the Indian consumer goods sector. HSBC is the manager to the offer.
"It makes a lot of sense to increase stake if the company is serious about staying here for the long term," said G. Chokkalingam, chief investment officer of Centrum Wealth Managers, which bought a small stake in HUL after the company reported results on Monday. "In the long term, we expect there will be more incentive for the parent company to share technology to the Indian unit, introduce more brands here and raise market share," he said.
Brokerages and analysts say the offer is good for HUL investors as it shows the parent company's confidence in the outlook for HUL as well as the Indian FMCG market. The offer can lead to a rerating of India's consumer sector, said IDFC Securities. Independent market analyst Sanjiv Bhasin said the offer is a "huge positive for India's FMCG market".
Ramesh Damani, member of the BSE and an HUL shareholder, said not many shareholders are likely to tender to the open offer. Unilever may have to increase its offer price, given the sheer scale of transaction. At 12.43 pm, the stock was trading at Rs 583.80, up 17.32 per cent.