Kraft Heinz makes approach to Unilever on possible merger
Unilever rejected the approach, Kraft Heinz said Friday in a statement issued in response to speculation that it had made a bid. The Pittsburgh-based company said it made a “comprehensive proposal” and will seek to gain an agreement on the terms of a transaction.
Unilever shares surged as much as 15 percent to a record in London, valuing the maker of Hellmann’s mayonnaise at more than 113 billion pounds ($140 billion). The stock gained as much as 12 percent in Amsterdam, while Kraft Heinz gained about 4.7 percent in premarket trading in New York.
“There can be 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,” said the U.S. maker of Velveeta cheese.
A deal would mark a major step-up in industry consolidation following this week’s $16.6 billion agreed offer for baby-formula maker Mead Johnson Nutrition Co. by Reckitt Benckiser Group Plc. Consumer-goods makers need to find new avenues for growth as conditions become tougher across the globe. 3G Capital, the private-equity firm that runs Kraft Heinz, is under pressure to either do another major deal or show the company can boost sales.
Kraft’s statement followed a report on the Financial Times Alphaville blog that mentioned a price of 4,000 pence a share, about 19 percent above Thursday’s close. Berenberg analysts said such a valuation would imply multiples of 3 times sales and 21 times earnings, “which strikes us as very low.”
Kraft Heinz is itself the product of a merger. The company was forged by a $55 billion combination orchestrated by Warren Buffett’s Berkshire Hathaway Inc. and 3G, which had teamed up two years earlier on a buyout of H.J. Heinz. There had been speculation that 3G would look to buy another food company and resume a cost-cutting cycle spearheaded by Chief Executive Officer Bernardo Hees. Mondelez International Inc., General Mills Inc. and Kellogg Co. have been mentioned as potential targets.
The deal would be the largest takeover ever in the food or beverage industries, surpassing Anheuser-Busch InBev SA’s purchase last year of SABMiller Plc for about $123 billion including debt, InBev NV’s purchase of Anheuser-Busch Cos. in 2008 and the 2015 transaction that created Kraft Heinz, according to data compiled by Bloomberg.
Source: www.bloomberg.com