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Unilever Rejects Undervalued Merger Bid from Kraft Heinz

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Consumer products behemoth, Unilever plcUL rejected Kraft Heinz Company's KHC $143 billion merger proposal on Feb 17, 2017 stating that that there is no financial or strategical merit in it. As a result, Kraft Heinz has decided to drop the issue and announced that the comapny has amicably withdrawn its offer. Initially, Kraft Heinz stated its intentions of working out a deal for the Anglo-Dutch firm.

U.S.food company, Kraft Heinz had made a surprise merger offer on Feb 17 to Unilever in an attempt to build a global consumer goods company. Unilever shares rose to a record high of 15% on Friday, following the news of the offer as investors welcomed the deal.

However, the offer was flatly rejected on the same day by Unilever stating that the offer was undervalued.

Nonetheless, market analysts feel that Kraft Heinz may seek other options in the market for acquisitions. Further, analysts are of the opinion that since the company made a bid for the whole of Unilever and not just the food business indicates that Kraft Heinz is potentially open to acquiring other packaged consumer goods as well.

If the deal had materialized, the combined entity would have $82 billion in sales making it second to Nestle as the world's biggest packaged food maker in terms of sales.

Meanwhile Unilever continues to struggle with declining volumes in Brazil and a soft economy in Russia. Further, the company is witnessing weakness in the developed markets with little sign of recovery in North America or Europe. Moreover, it still remains cautious as consumer demand continues to be weak. Additionally, it has been delivering weak results for the past few quarters due to sluggishness in the emerging markets, which account for about two-thirds of the company's total revenue. Though the emerging markets offer robust long-term prospects, they are generally volatile.

Although the share prices have spiked following the news of the probable takeover, the stock had been underperforming the Zacks categorized Consumer Staples sector in the past one year. The company shares had declined 4.5% in 12 months till Feb 14, 2017, underperforming the industry which gained 3.4%.

Zacks Rank & Other Stocks to Consider

Unilever carries a Zacks Rank #2 (Buy).

Some other favorably placed stocks in the broader consumer staples sector include ConAgra Foods Inc.. CAG and Ingredion, Inc. INGR . Both these stocks carry the same rank as United Natural. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

ConAgra has an expected earnings growth rate of 8.8%. Ingredion have an expected earnings growth rate of 3.% and 11.0%, respectively.

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Unilever PLC (UL): Free Stock Analysis Report

ConAgra Foods Inc. (CAG): Free Stock Analysis Report

Ingredion Incorporated (INGR): Free Stock Analysis Report

The Kraft Heinz Company (KHC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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