What Glaxo’s India offer says about EM affiliates

Any investor familiar with emerging markets will be aware that often find partly-owned subsidiaries and affiliates of major multinationals with their own listing on the local stock exchanges. For example, Unilever has listed divisions in India, Indonesia and Pakistan, while Wal-Mart owns Wal-Mex (Mexico) and Massmart (South Africa)

The reasons why these subsidiaries are publicly traded varies, although it sometimes reflects local rules that at some point prohibited foreign companies from being the sole owner of a local company. Where these rules have changed, the local listings can often look like an anachronism today, especially given that many of them are lightly traded.

So one might expect the shareholders in the stocks to jump at the parent multinational’s offer to buy them out at a premium. Which makes it interesting to see what’s going on with GlaxoSmithKline’s bid to increase its stake in its Indian affiliate,¬†GlaxoSmithKline Consumer Healthcare.