Unilever Rejects Takeover Offer From Kraft Heinz

Unilever has rejected a takeover offer from US food giant Kraft Heinz. However, Kraft said it was looking forward “to working to reach agreement on the terms of a transaction”, suggesting it could return with an improved proposal.

If the deal was agreed, it would be one of the biggest in corporate history, with Unilever currently valued at more than £100bn. It would also unite some of the biggest brands in the consumer goods industry at a time of slowing growth.

Kraft’s proposal is rumoured to be around £40 a share – a premium of just under 20% Of Unilever’s opening price this morning.

In a statement to the stock market, Kraft Heinz said it “notes the recent speculation regarding a possible combination of Kraft and Unilever”, adding: “Kraft confirms that it has made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living.”

It concluded by saying there was “no certainty that any further formal proposal will be made to the board of Unilever or that an offer will be made at all or as to the terms of any transaction.”

Unilever is the world’s fourth-largest consumer goods company by sales, with revenues last year of €52.7bn. Following the revelation, the group’s share price has surged nearly 15%.

Kraft Heinz yesterday revealed that its fourth-quarter sales fell 3.8% to $6.9bn, although profits came in better-than-expected, helped by lower costs.

NAM Implications:
  • Where at: Spurning the initial offer could be an invitation to raise the price…, whilst for both companies this represents an opportunity/excuse to re-engineer their retail offerings in the face of pressure from private label and structural changes in retail markets as markets continue to flat-line…
  • Where headed: The initial 15% surge in Unilever share price indicates City interest in the potential move, but there is a high likelihood of delays due to inevitable scrutiny by the competition authorities, globally. Any agreement will result in brand overlap and result in pruning of portfolios.
  • Effect on you: Competitor NAMs need to anticipate radical reshaping of the competitive landscape, in categories inside and outside the proposed combination.
  • …but major opportunities for suppliers – and retailers – that can react fast to the inevitable distraction ref competition-authorities involvement…
  • Action: Anticipate the obvious sell-offs in your categories, and make ready for Kraft moves following acquisition at an eventual price that will need justification to the stock markets in retrospect…