Kraft Proposes Deal to Merge With Unilever--2nd Update
18 February 2017 - 12:28AM
Dow Jones News
By Anne Steele
Kraft Heinz Co. said Friday it has made a bid to merge with U.K
consumer products giant Unilever PLC, a move that would bring
together some of the best-known consumer-facing brands in the
world.
Kraft Heinz said Unilever has declined the proposal, but that
"we look forward to working to reach agreement on the terms of a
transaction."
The U.S.-based food and beverage maker said it is uncertain that
any further formal proposal will be made to Unilever or that an
offer will be made at all. It also said the terms of any such
transaction are uncertain.
Representatives for Unilever didn't immediately respond to
requests for comment.
Shares of Unilever rose more than 14% in London trading, giving
the company a market value of GBP109.8 billion, or $136.4 billion,
according to FactSet. Shares of Kraft Heinz rose 5.6% to $92.19 in
premarket New York trading; at that level, it has a market value of
about $112 billion.
A deal would mark the latest wave of consolidation among
consumer-goods giants after Heinz in 2015 merged with Kraft in a
deal orchestrated by Warren Buffett and Brazilian private-equity
firm 3G Capital Partners L.P., creating one of the world's largest
food-and-beverage companies. 3G, an acquisitive Brazilian firm, is
known for buying consumer companies it considers bloated and
aggressively slashing costs.
A union would bring together brands like Kraft Heinz's namesakes
as well as Oscar Mayer hot dogs, Planters peanuts, Philadelphia
cream cheese and Maxwell House coffee with Unilever's Dove soaps,
Axe body sprays, Hellman's mayonnaise, Lipton teas and Ben &
Jerry's ice cream. Unilever has increasingly been pushing into
higher-end personal care, making a series of acquisitions like its
2016 deal to buy Dollar Shave club for $1 billion.
Consumer-goods firms are struggling with a host of headwinds
they have little control over: fluctuating exchange rates, rising
commodity prices that often feed into packaging or ingredient costs
and tepid global economic growth that has weighed on sales. All
that has sharpened the focus on the few things executives can still
influence: costs and nimbleness in meeting fast-changing consumer
tastes.
At Unilever, the world's second-largest consumer-goods firm by
sales after Procter & Gamble Co., sales growth slowed last
year, spooking investors and underscoring the cost-cutting pressure
that consumer-goods companies face as they struggle to sell more of
their staples, from soap to packaged food, around the world.
Kraft Heinz, meanwhile, has struggled with sales declines in the
U.S. and Europe, where consumers are buying food they view as
fresher and more natural. The company has responded by removing
artificial colors from foods like Kraft's famous blue-box
mac-and-cheese, and creating a new brand of frozen meals aimed at
using trendier ingredients to attract younger consumers.
--Saabira Chaudhuri contributed to this article.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
February 17, 2017 08:13 ET (13:13 GMT)
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