Unilever rejects Kraft Heinz's $143B takeover bid

Dive Brief:

  • Unilever has declined a $143 billion takeover bid from Kraft Heinz, according to The Wall Street Journal.
  • Unilever rejected the proposal because company officials saw that it undervalued the company's worth. "It sees no merit, either financial or strategic, for Unilever’s shareholders,” the company told The Wall Street Journal. “Unilever does not see the basis for any further discussions.”
  • Kraft Heinz told The Wall Street Journal it's unclear if another formal proposal will be made to Unilever, but “we look forward to working to reach agreement on the terms of a transaction.”

Dive Insight:

If the two mega-companies were to merge, some of the biggest brands in household goods — from foods to personal care and cleaning supplies — would be owned by the same corporation. This would significantly expand and diversify Kraft Heinz's product assortment, which is currently all food.

A combined company would boast some of the most recognizable food brands in the world, from Kraft Heinz's condiments and macaroni and cheese to Unilever's Hellmann's mayonnaise and Ben & Jerry's ice cream. Analysts said earlier this week that Kraft Heinz looked like it was ready to make an acquisition. The target had been unclear, but this shows Kraft Heinz was prepared to shoot the moon with a potentially huge deal.

Since the 2015 Kraft Heinz merger — orchestrated by Warren Buffett's Berkshire Hathaway and 3G Capital Partners LP — the company has been working to cut what it sees as bloated costs and grow its earnings. One of Kraft Heinz's tactics for growth is zero-based budgeting, where employees have to justify all expenses and cannot rely on previous spending. 

Earlier this week, Kraft Heinz's mixed quarterly report showed an increase in earnings, but declining sales. CEO Bernardo Hees said the company ended the year consistent with expectations and sees good momentum heading into 2017.

While Unilever looks set to close the door on merger talks, shareholders might not let that happen. A bigger offer could render the company's original justification for rejection moot. Unilever's stock reacted positively to news of the takeover bid, increasing more than 12% after news of the potential merger broke.

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Filed Under: Corporate
Top image credit: Flickr user Mike Mozart