LONDON -Unilever, the monolithic company behind the likes of Ben & Jerry’s ice cream, Hellmann’s mayonnaise and Dove, has rejected a takeover bid from fellow consumer goods giant firm Kraft Heinz, both companies confirmed on Friday.
On Friday afternoon, Kraft, which is backed by legendary investor Warren Buffett, confirmed that it had an approach to take over Unilever rejected, following a story from the Financial Times Alphaville blog earlier in the day.
“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,” a statement from the firm said.
The statement continues: “There can be no certainty that any further formal proposal will be made to the Board of Unilever or thatan offer will be made at all or as tothe terms of any transaction.”
A Unilever statement said that the offer represented an 18% premium on the company’s value, but seemed to pour water on any chance that a merger of the two companies is likely, saying:
"Unilever notes the recent announcement by The Kraft Heinz Company ("Kraft Heinz") that it has made a potential offer for all of the shares of Unilever PLC and Unilever N.V.
"Their proposal represents a premium of 18% to Unilever's share price as at the close of business on 16 February 2017. 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."
Kraft Heinz offered $50 per share "in a mix of $30.23 per share in cash payable in U.S. dollars and 0.222 new enlarged entity shares per existing Unilever share, which valued Unilever at a total equity value of approximately $143 billion."
Any merger between the two firms would be one of the biggest in history. According to a "back of envelope" calculation from CNBC's Carl Quintanilla, the merger could be the 3rd biggest ever if completed.
Shares in Unilever took as a result of the offer, climbing more than 12% in London trade on the day after the news was announced. That takes the stock to an all-time record. Here is the chart of Unilever's performance as of around 2.50 p.m. GMT (9.50 a.m. ET):
Kraft's stock has also taken off in New York trade, climbing more than 7% in the first 20 minutes of the day. Here is the chart:
Kraft Heinz produces goods including the ubiquitous Heinz Ketchup and Philadelphia cream cheese, and is well known for its ties to investing legend Warren Buffett. According to a recent filing, Buffett's Berkshire Hathaway had a near £24 billion ($30 billion) stake in Kraft Heinz at the end of the fourth quarter.
Brazilian billionaire Jorge Lemann is also heavily invested in Kraft Heinz through his investment company 3G Capital.
Kraft Heinz itself was formed by the 2015 merger of Kraft and Heinz, a deal orchestrated by Buffett and Lemann.
Both Kraft Heinz and Unilever are true giants of the consumer goods industry and the range of everyday brands that the two companies produce is truly staggering.
Unilever controls 15 brands which generate annual sales of more than €1 billion (£860 million; $1.07 billion), including Dove, men's grooming products made by Lynx (also known as Axe), and Lipton tea.
The infographic below, produced by Oxfam illustrates just how many huge consumers goods Unilever makes: