Kraft Heinz Offers $143B to Acquire Unilever

The deal would be the third-biggest takeover in history but Unilever said Kraft's offer “profoundly undervalues the company."
Matthew HellerFebruary 17, 2017
Kraft Heinz Offers $143B to Acquire Unilever

Kraft Heinz on Friday proposed a megamerger of food giants, offering $143 billion to acquire Unilever in what would be the third-biggest takeover in history.

U.K-based Unilever quickly rejected the offer, calling it “profoundly undervalues the company,” but analysts said Kraft’s move could flush out other bidders.

The proposed merger would combine Unilever’s vast range of consumer brands, including Ben & Jerry’s ice cream, Dove soap, and Hellmann’s mayonnaise, with such Kraft products as Philadelphia cheese and Heinz baked beans and ketchup.

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Kraft said it had made “a comprehensive proposal” and looked “forward to working to reach agreement on the terms of a transaction.” It would pay $30.23 per share in cash and 0.222 of a share in a new enlarged entity per Unilever share, representing an 18% premium to the share price on Thursday.

“Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever’s shareholders,” the British company said in a news release. “Unilever does not see the basis for any further discussions.”

As The New York Times reports, the offer “came as consumer-goods companies are being squeezed by fluctuating currency rates, such as the strong United States dollar in Kraft Heinz’s case, and higher prices for staples used in their products.”

“It would also signal further consolidation in the sector as makers of consumer goods push for more space in the public’s shopping carts,” the Times added.

Warren Buffett’s Berkshire Hathaway and 3G Capital own 50.9% of Kraft Heinz. 3G “has orchestrated a string of big deals rocking the food and drink industry, including Anheuser-Busch InBev’s takeover of SABMiller and the combination of Kraft and Heinz,” Reuters noted.

Analysts at Jeffries called Kraft’s offer for Unilever a “seismic shock,” while RBC Capital Markets analyst David Palmer said Kraft “will likely need to raise its offer substantially if it hopes to change the outcome.”

Unilever is the fourth largest seller of packaged food worldwide — behind Nestle, PepsiCo, and Mondelez — and Kraft Heinz is the fifth. “The combined entity would have a huge brand footprint and be able to flex bargain muscles even more with supermarkets,” Neil Wilson, an analyst at London broker ETX Capital, told BBC News.