* Unilever says $50/shr bid too low
* Sees no basis to continue talks
* Deal would be one of the biggest ever
* Unilever shares touch record high
(Adds links to Breakingviews columns)
By Martinne Geller and Pamela BarbagliaLONDON, Feb 17 (Reuters) - U.S. food company Kraft Heinz Co
<KHC.O> made a surprise $143 billion offer for Unilever <ULVR.L>
in a bid to build a global consumer goods giant, although it was
flatly rejected on Friday by the maker of Lipton tea and Dove
A combination would be the third-biggest takeover in history
and the largest acquisition of a UK-based company, according to
Thomson Reuters data, triggering British fears over jobs.
It would bring together some of the world's best known
brands, from toothpaste to ice creams, and combine Kraft's
strength in the U.S. with Unilever's in Europe and Asia.
The global packaged food industry is grappling with slowing
growth, new competition from upstart brands, deflation in
developed markets and more health-conscious consumers.
Although Kraft, which is controlled by U.S. billionaire
Warren Buffett and private equity firm 3G Capital, said it
looked forward to talking terms, Unilever said it saw no reason
to discuss a deal without financial or strategic merit.
Kraft has until March 17 to make a final bid for Unilever
under UK takeover rules.
Unilever shares rose to a record following news of the
offer, which analysts at Jefferies called a "seismic shock", and
closed 15 percent higher, short of Kraft's$50 per share offer
price, with the news lifting shares across the sector.
Unilever said Kraft's proposal included $30.23 per share in
cash, payable in U.S. dollars, and 0.222 of a share in a new
enlarged entity per Unilever share and represented an 18 percent
premium to its share price on Thursday.
"We believe Kraft will likely need to raise its offer
substantially if it hopes to change the outcome," RBC Capital
Markets analyst David Palmer said in a research note.
Kraft's move could flush out other bidders for Unilever, but
of the potential rivals, U.S consumer giant Procter & Gamble Co
<PG.N> may face anti-trust hurdles, while pharmaceutical and
consumer packaged goods company Johnson and Johnson <JNJ.N>
would likely not be interested in household products.
Unilever has a larger presence than some peers in emerging
markets, which were once the big driver of industry growth, but
which have slowed in recent years.
It is also feeling the after-effects of Britain's decision
to leave the European Union, with a fall in the pound currency
raising the cost of producing consumer goods in the UK and
straining relations between the country's retailers and
"Unilever has struggled to achieve top line revenue growth
for years and has achieved profit growth through improving the
product mix and cutting costs. A tie up with Kraft Heinz would
enable it to continue to improve profits in the same way,"
Jonathan Bell, Chief Investment Officer at Stanhope Capital,
said in an email.
3G READY TO DEAL
Although Kraft is smaller than Unilever, with a market value
of $106 billion as of Thursday, it is 50.9 percent owned by
Buffett's Berkshire Hathaway <BRKa.N> and 3G Capital, which also
controls Anheuser-Busch InBev <ABI.BR>.
3G, known for driving profits through aggressive cost
cutting, 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.
A deal would offer opportunities to combine marketing,
manufacturing and distribution in addition to cutting costs, but
some industry analysts said Kraft might not want Unilever's
household and personal goods brands and could spin them off.
"This is cheap money meeting industrial logic," said Steve
Clayton, manager of the HL Select UK Shares fund at Hargreaves
Lansdown, which owns Unilever shares.
"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," Clayton added.
Britain's largest union, Unite, expressed immediate concern
about potential job losses if Unilever fell under Kraft's
control. Unite urged Unilever to continue fending off the
A recent wave of cross-border deals in Europe is leaving
British businesses vulnerable to possible job cuts. PSA's
proposed acquisition of General Motor's Opel business may
eventually lead to heavy restructuring at the Vauxhall brands
which employ 4,500 people in Britain, sources said.
Centerview and Morgan Stanley are working with Unilever
alongside UBS and Deutsche Bank, who are also acting as
corporate brokers. Kraft is working with Lazard.
Lazard big winner if Kraft Heinz eats Unilever - IFR News
Group of hedge funds set for big profit [nL8N1G252K]
BREAKINGVIEWS-Kraft Heinz may have to pass hat to buy Unilever
BREAKINGVIEWS-Unilever and Kraft risk culture clash too far
(Additional reporting by Angelika Gruber, Danilo Massoni,
Lauren Hirsch and Simon Jessop; Writing by Alexander Smith;
Editing by Tom Pfeiffer)
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Keywords: UNILEVER M&A/KRAFT (UPDATE 5, PIX)