Unilever says Kraft Heinz is biting off more than it can chew
- Author: Zachary Reyes Feb 18, 2017,
Feb 18, 2017, 13:02
Unilever is a British-Dutch conglomerate with headquarters in London and Rotterdam.
Unilever said Friday that it has rejected the $50-a-share proposal, comprising about two-thirds in cash and one-third in new stock.
According to data from Euromonitor, Unilever is the fourth biggest packaged food company in the world, while Kraft Heinz is number five. Deutsche Bank AG assumed coverage on shares of The Kraft Heinz Company in a report on Wednesday.
Kraft Heinz said it made an approach to Unilever about combining the companies, a deal that would create a consumer-goods giant with brands spanning Dove soap to Heinz ketchup. "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". The Kraft Heinz Company (NASDAQ:KHC) is -4.40% away from its 52 week high and its 52 week range is $69.83 - 91.30.
Unilever shares have soared 14.6% to 3,836p since the statement was released.
"Their proposal represents a premium of 18 percent to Unilever's share price as at the close of business on February 16, 2017". It said it saw no basis for further discussions. A takeover of the company would be one of the largest in corporate history.
"While creating synergies in sauces and soups could be a rational for such a deal, a combination of Heinz and Hellmann in mayonnaise could struggle to be given approval by competition authorities", he said. The current group was formed in 2015 from the merger of United States food groups Kraft and Heinz.
The Kraft Heinz Company (NASDAQ:KHC) shows its Return on Assets (ROA) value of 2.3 percent, while the Return on Equity (ROE) value is 4.8 percent and Return on Investment (ROI) value stands at 2.7 percent.
On Thursday, Kraft Heinz, based in Chicago and Pittsburgh, reported net sales of $26.5 billion, while saying it would continue its cost-cutting efforts, targeting pre-tax cost savings of $1.7 billion by the end of this year.
Kraft Heinz came together in a $100bn deal orchestrated by Mr Buffett and Brazil's 3G Capital in 2015 and has been focused on driving down costs aggressively in the companies it has bought, aiming to save $1.7bn annually by 2018.