Thursday 22 March 2018

Unilever knocks back €134bn Heinz takeover bid

Some of the Unilever products Photo: PA
Some of the Unilever products Photo: PA
Donal O'Donovan

Donal O'Donovan

The corporate giant behind hundreds of Ireland's biggest household brands has rejected a $143bn (€134bn) takeover offer from its biggest rival.

Unilever rejected the surprise bid from US 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.

But while Unilever, the maker of a hundreds of branded supermarket staples including Lyons Tea and Dove soap, said the $50-a-share offer undervalued it and recommended its shareholders take no action.

Kraft Heinz said it looked forward to "working to reach agreement on the terms of a transaction".

Analysts saw this as a sign Kraft will come back with a higher bid. Unilever shares jumped as much as 14pc to a record high.

They were up 13pc at £37.79 yesterday, but still short of the offer price.

A combination of the two multinationals would be the third-biggest takeover in history and the biggest ever acquisition of a UK-based company, according to Thomson Reuters data.

For Kraft Heinz a deal would catapult it out of the North American market, which accounts for about 80pc of sales.

Anglo-Dutch giant Unilever has a larger presence in Europe and in emerging markets, which were once the big driver of industry growth.

It is also feeling the after-effects of Britain's decision to leave the European Union - famously sparking a major upset last year when it tried to impose price hikes on supermarkets, including in the Musgrave Group in Ireland, after the pound plunged.

Neither company is a major employer in Ireland. Unilever owns iconic Irish brands like Lyons Tea and HB ice-cream, but shut its last manufacturing site here in 2006.

It has around 200 Irish staff who are focused on marketing and distribution.

In 2014 Heinz sold the Dundalk plant where its Weight Watchers frozen ready meals are prepared to Manchester-based The Authentic Foods Co in a deal that includes a three-year agreement to continue manufacturing here.

Although Kraft is smaller than Unilever, with a market value of $106bn as of Thursday, it is 50.9pc owned by billionaire Warren Buffett's Berkshire Hathaway and 3G Capital, the private-equity firm that also controls Anheuser-Busch InBev.

It has been widely expected to do a deal this year, given earlier reports that 3G had raised a new fund.

Private equity investor 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.

Unilever said Kraft's proposal represented an 18pc premium to its share price on Thursday, the day before news of the bid was announced in a stock market statement.

It said Kraft's proposal included $30.23 per share in cash, payable in US dollars, and 0.222 of a share in a new enlarged entity per Unilever share.

"This is cheap money meeting industrial logic," said Steve Clayton, a fund manager at Hargreaves Lansdown in London, which owns Unilever shares.

A deal would offer opportunities to combine marketing, manufacturing and distribution in addition to cutting costs.

"Kraft Heinz are attempting a massive push on the fast forward button ... to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades," Mr Clayton added. (Additional reporting Reuters)

Irish Independent

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