UK-Dutch consumer goods giant Unilever — owner of brands including Dove, Flora, Hellmans, PG Tips, Knorr and Persil — rejected a potential offer of around $143 billion from The Kraft Heinz Company, saying it “fundamentally undervalues” Unilever.
A merger of the companies would be the third-biggest takeover in history and the largest acquisition ever of a UK-based company, according to Thomson Reuters data.
The move alarmed union leaders and has led to fears over British jobs.
Kraft Heinz, 50.9% owned by billionaire Warren Buffett’s Berkshire Hathaway and private equity firm 3G Capital, maintained that it was looking forward to talking terms, but Unilever said it saw no basis for further discussions.
“Their proposal represents a premium of 18% to Unilever’s share price as at the close of business on 16 February 2017,” said Unilever.
“This fundamentally undervalues Unilever.
“Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever’s shareholders.
“Unilever does not see the basis for any further discussions.”
Unilever plc and Unilever N.V. recommend that shareholders take no action.
“The proposal received was that Unilever common shareholders would receive $50.00 per share in a mix of $30.23 per share in cash payable in US dollars and 0.222 new enlarged entity shares per existing Unilever share, which valued Unilever at a total equity value of approximately $143 billion,” added Unilever.
“As at the close of business on 16 February 2017, a mix of $30.23 in cash payable in U.S. dollars and 0.222 Kraft Heinz shares per existing Unilever share would value each Unilever common share at $49.61, representing a premium of 18% to Unilever’s share price.”
Kraft Heinz must now either announce a firm intention to make an offer for Unilever under the UK Takeover Code by March 17 or announce that it does not intend to make an offer.
Britain’s largest union, Unite, urged Unilever to “resist takeover attempts by Kraft Heinz and its venture capital backers.”
Unite national officer Rhys McCarthy said: “Unite is seeking an urgent meeting with Unilever senior management where we will seek assurances that the company will resist this predatory takeover by Kraft Heinz.
“Unite members make household products which are much loved by UK consumers.
“Kraft Heinz and their backers’ reputation for cost cutting, we believe, will lead to great brands being harmed through job cuts and a never ending drive to push costs down.
“This takeover bid, is we fear, driven by a desire for a growth in sales, not through product innovation and maintaining great brands, but by gobbling up a major competitor and slashing costs to generate a quick buck.
“Unite does not believe this takeover is either in Kraft Heinz workers’ interests or those of Unilever and that ultimately it will lead to jobs losses and poorer products for consumers.”
In a statement, Kraft Heinz said: “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.
“While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction.”