Unilever is high on Kraft Heinz's shopping list

Unilver shares soared to a record high on Friday after Kraft Heinz made a takeover offer for it.
Unilver shares soared to a record high on Friday after Kraft Heinz made a takeover offer for it.PHOTO: BLOOMBERG

US grocery giant may hike $203b offer to take over Anglo-Dutch food, home product giant

NEW YORK • The world's grocery carts could soon be filled with more and more products from just one global colossus.

One recently merged giant, Kraft Heinz, has set its sights on Unilever, home of Dove soap and Axe body spray, Ben & Jerry's ice cream and Hellmann's mayonnaise.

Kraft Heinz on Friday said it had made a US$143 billion (S$203 billion) takeover offer for Unilever.

If completed, it would be the largest cross-border merger since the 2000 acquisition of Germany's Mannesmann by British wireless provider Vodafone.

Publicly, British-Dutch multinational Unilever has decried Kraft's US$143 billion buyout offer as lacking merit and said there was no basis for further talks.


Kraft Heinz's takeover offer for Unilever, which is higher than the gross domestic product of Hungary, which according to World Bank, stands at US$122 billion in 2015. PHOTO: BLOOMBERG

Behind the scenes, Unilever executives have fretted over Kraft's penchant for slashing costs and lack of vision for cultivating brands, according to people familiar with the situation. Kraft also lacks experience managing home and personal-care businesses, which account for about 60 per cent of Unilever's revenue, they said.

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

Kraft has said it is still pursuing a deal. According to British takeover rules, Kraft has until March 17 to announce a firm intention to make a specific offer, leaving it just one month to negotiate or walk away, according to Wall Street Journal.

The prospect of both reaching an agreement sent shares of Unilever soaring 13 per cent to a record high on Friday. It is now valued at more than £114 billion (S$200 billion).

The rally makes it more likely that Kraft will increase its offer, a person with knowledge of the bidder's deliberations.

Shares of Kraft also rose, climbing 11 per cent. That values the food giant at US$117.6 billion.

Pressed by growing competition from upstarts and changing consumer habits, food and consumer- goods giants will have little choice but to seek deals.

Brazilian investment firm 3G Capital, which bought Heinz and then Kraft just two years ago, has the resources and the goodwill of Wall Street to continue to pursue Unilever. It also has the support of billionaire investor Warren Buffett, who is expected to provide financing in any deal with Unilever.

Against such as backdrop, Unilever is trying to convince investors that a deal would not make sense. The company has been speaking to shareholders about why it should remain a stand-alone business, arguing that there are not many synergies between the two entities, said people in the know.

Unilever also could try to find a white-knight suitor that it sees as more compatible, according to Stifel Financial analyst Mark Astrachan. That may include companies such as Colgate-Palmolive or Kimberly-Clark, he said in a report.

A combination of Kraft Heinz and Unilever would create a huge empire of hundreds of household names, with more than US$82 billion in sales. NYTIMES, BLOOMBERG

US$143b Kraft Heinz's takeover offer for Unilever, which is higher than the gross domestic product of Hungary, which according to World Bank, stands at US$122 billion in 2015.

A version of this article appeared in the print edition of The Sunday Times on February 19, 2017, with the headline 'Unilever is high on Kraft Heinz's shopping list'. Print Edition | Subscribe