Kraft Heinz spurned in $143B Unilever takeover approach

Katie RamirezFeb 19, 2017

Unilever rejected the surprise bid from United States food company Kraft Heinz Co on Friday, saying it saw no reason to discuss a deal which it said had no financial or strategic merit. It would add Hellmann's mayonnaise, Ben & Jerry's ice cream and Knorr soups to a portfolio that includes Heinz ketchup and Kraft Macaroni & Cheese.

Kraft Heinz is still hungry for Unilever after the consumer goods giant rejected a surprise $US143 billion ($A187 billion) offer.

"If I was Unilever, I would fight this with hand and fist", said Erich Joachimsthaler, a branding expert who runs the Vivaldi consulting firm.

And while Unilever grew sales and passed on price increases in all of its markets outside of Europe last year, Kraft wasn't able to manage year-on-year expansion in any, although stripping away currency changes gave it organic sales growth in Canada and its "Rest of World" segment.

Mumbai: A merger of Unilever Plc and Kraft Heinz Co. would give the latter access to the distribution network of India's largest consumer packaged goods company by sales, Hindustan Unilever Ltd (HUL).

Against that backdrop, Unilever is trying to convince investors that a deal wouldn't make sense.

"Their proposal represents a premium of 18 percent to Unilever's share price as at the close of business on February 16, 2017".

Another leading food company, General Mills, fell 2.8 percent after lowering its sales and profit forecast due to the sales performance of U.S. yogurt and soup.

Nearly two years after it was created in a megamerger, the Kraft Heinz going shopping again. Buffett and 3G acquired Heinz in 2013 and together own about 51 per cent of Kraft Heinz.

Berenberg analysts said such a valuation would imply multiples of 3 times sales and 21 times earnings, "which strikes us as very low". 3G - founded by Brazilian executives Jorge Paulo Lemann, Marcel Telles, Carlos Alberto Sicupira, Roberto Thompson and Alex Behring - has engineered a series of huge transactions in the food and drink industries.

Although Unilever UL, +12.64% ULVR, +13.43% said it rejected Kraft Heinz's bid, Susquehanna Financial analyst Pablo Zuanic said he expects Kraft to "persist" and to "eventually happen", and that it will be a "friendly" deal. If it goes ahead, it would be one of the biggest mergers in corporate history, second only to Vodafone's $183bn takeover of Germany's Mannesmann in 2000.

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