U.S. Markets close in 5 hrs 23 mins

Unilever rejects Kraft Heinz takeover bid, shares spike

Myles Udland
Markets Reporter

Shares of Unilever (UL) listed in the US were trading sharply higher in pre-market trade on Friday after Kraft Heinz (KHC) confirmed it had made a bid to acquire the company.

In a statement on Friday, Kraft Heinz said (emphasis added):

“The Kraft Heinz Company notes the recent speculation regarding a possible combination of Kraft Heinz and Unilever plc / Unilever NV. Kraft Heinz 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. There can be no certainty that any further formal proposal will be made to the Board of Unilever or that an offer will be made at all or as to the terms of any transaction. 

In pre-market trading on Friday, US-listed shares of Unilever were up more than 10%.

Kraft Heinz shares were higher by almost 4% in pre-market trading on Friday. On Thursday, Kraft Heinz shares lost 4% after disappointing quarterly earnings.

Friday’s statement came after The Financial Times’ Bryce Elder reported that Kraft Heinz was interested in Unilever.

Shares of Unilever listed on the London Stock Exchange spiked on Friday and shortly after this report Kraft Heinz issued a statement confirming it had made an offer to Unilever. The company’s statement added that on or before March 17, Kraft Heinz will announce it either does or does not plan to make a bid for Unilever.

Both companies have market capitalizations over $100 billion.

In a separate statement, Unilever said:

[Kraft Heinz’s] 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. Further announcements will be made as appropriate.

The proposal received was that Unilever common shareholders would receive $50.00 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.

As at the close of business on 16 February 2017, a mix of $30.23 in cash payable in U.S. dollars and 0.222 Kraft Heinz shares per existing Unilever share would value each Unilever common share at $49.61, representing a premium of 18% to Unilever’s share price

Kraft Heinz, you’ll recall, is the result of a merger between H. J. Heinz, which was owned by Warren Buffett’s Berkshire Hathaway (BRK-A) and 3G Capital, and Kraft Foods back in 2015.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

Read more from Myles here: