Unilever surges to multi-year highs as it rejects Kraft Heinz offer

Michele Maatouk Sharecast | 17 Feb, 2017 12:25 - Updated: 15:52 | | |

  • 4,268.00
  • 0.15%6.50
  • Max: 4,284.00
  • Min: 4,228.50
  • Volume: 372,750
  • MM 200 : n/a
09:10 22/09/17
  • 2,500.60
  • -0.24%-6.05
  • Max: 2,507.16
  • Min: 2,499.00
  • Volume: 0
  • MM 200 : n/a
21:27 21/09/17
  • 7,253.98
  • -0.14%-9.92
  • Max: 7,263.90
  • Min: 7,242.23
  • Volume: 0
  • MM 200 : n/a
09:10 22/09/17
  • 5,934.91
  • -0.65%-38.69
  • Max: 5,965.60
  • Min: 5,915.74
  • Volume: 0
  • MM 200 : n/a
23:26 21/09/17
  • 1,503.22
  • -0.12%-1.84
  • Max: 1,503.97
  • Min: 1,501.34
  • Volume: 0
  • MM 200 : n/a
09:10 22/09/17
  • 8,617.76
  • 0.22%19.20
  • Max: 8,626.75
  • Min: 8,573.47
  • Volume: 0
  • MM 200 : n/a
09:10 22/09/17
  • 4,029.86
  • -0.14%-5.56
  • Max: 4,035.45
  • Min: 4,022.98
  • Volume: 0
  • MM 200 : n/a
09:10 22/09/17
  • 3,979.66
  • -0.14%-5.39
  • Max: 3,985.07
  • Min: 3,973.08
  • Volume: 0
  • MM 200 : n/a
09:10 22/09/17
  • 79.01
  • -1.08%-0.86
  • Max: 80.46
  • Min: 78.94
  • Volume: 2,962,702
  • MM 200 : n/a
23:26 21/09/17

Unilever shares surged on Friday after the London-listed consumer goods giant rejected a $143bn offer from Kraft Heinz.

Kraft noted recent speculation about a deal between the two and said 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.”

Unilever said in a statement that the offer from Kraft represents a premium of 18% to the closing share price on Thursday, which it believes “fundamentally undervalues” the group. Kraft offered Unilever $50.00 per share in a mix of $30.23 per share in cash payable in US dollars and 0.222 new enlarged entity shares per existing Unilever share.

“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.”

The company recommended that its shareholders take no action and said it will make further announcements as appropriate.

Nicholas Hyett at Hargreaves Lansdown said: "With Kraft Heinz saying it’ll be coming back to the table, it looks like the initial offer was just to test the water."

Meanwhile, Neil Wilson, senior market analyst at ETX Capital, said: "Unilever is a £100+bn company and this would be one of the biggest corporate tie-ups on record. Unilever rejected the bid but Kraft is likely to make another bid for more cash. It could be a very expensive strategy by Kraft but there are plenty of easy wins in terms of combining operations. Just as well Warren Buffett’s pockets are deep.

"Few initial thoughts – would competition authorities let this one through? It could come up against a number of hurdles as it would create a giant in the sector. EU regulators in particular could be against it. Kraft Heinz has the experience to drive the integration. Costs synergies are the name of the game – combing ops and supply chains. Both are coming into this on the back foot a touch. Unilever sales growth has slowed and come in below expectations while Kraft posted a 3.7% drop in the 4th quarter."

Wilson added that the combined entity would have a huge brand footprint and be able to flex bargain muscles even more with supermarkets.

RBC Capital Markets said this sort of premium has often proven inadequate in consumer staples M&A, so it is not surprised about Unilever’s explicit rejection.

"Moreover, the fact that Unilever said it ‘sees no merit, either financial or strategic’ and ‘does not see the basis for any further discussion’ makes us also wonder if Unilever’s focus on sustainability might make it very resistant to any further approach from Kraft. In any case, we believe Kraft will likely need to raise its offer substantially if it hopes to change the outcome.”

Shares in Unilever sprang higher on the news, hitting technical resistance at 3,807.5p, the 10 November 2016 intra-day highs (and previous 52-week high), but as of 1400 GMT were trading at 3,804.50p.

Kraft's mooted offer price equated to 4,024p at the then current exchange rate for cable of 1.2424.

Shares in the company were also trading at their loftiest levels in more than a decade.

Kraft was up 5.41% to $92.00 in pre-market trading on the NYSE.

More news

08:42 London open: Stocks edge lower on N Korea concerns as investors eye May speech

London stocks edged lower in early trade on Friday after North Korea reportedly threatened to test a hydrogen bomb over the Pacific and as investors awaited a key speech by Prime Minister Theresa May.

08:12 Kim Jong-un tells Trump he will 'pay dearly' as sanctions stepped up

Kim Jong-un has responded to Donald Trump's recent threats where the latter said he would "totally destroy" North Korea if the US or its allies were attacked.

08:03 Smiths saved by sterling boost, 'well positioned' for return to growth

Smiths Group reported a small decline in full year underlying revenue but 11% growth on a reported basis thanks to the weak pound and said strategic progress made in the year set it up to return to growth next year.

07:58 Lamprell H1 revenues drop, cuts full-year guidance

Oil rig builder Lamprell posted a drop in first-half revenue on Friday as it warned that revenue for 2018 would be 10% lower on the year.

07:51 Saga claims 'consistent growth' in first half

Specialist provider of products and services for those over 50, Saga, reported “consistent growth” of 5.5% in its underlying profit before tax for the first half on Friday, to £110.2m.

07:37 Acacia Mining yields positive trial results, Saga reports consistent growth

London open

07:37 London pre-open: Stocks seen weaker on North Korea woes, ahead of May speech

London stocks were set for a weaker open on Friday, taking their cue from downbeat sessions in the US and Asia after North Korea reportedly threatened to test a hydrogen bomb over the Pacific Ocean.

07:28 Acacia Mining shifts Buzwagi mine to gold bars to avoid export ban

Tanzanian gold miner Acacia Mining said its third mine in the country is likely to start generating cash again after positive results from a trial to increase the proportion of sellable gold bars.

07:11 Friday newspaper round-up: North Korea, May's speech, SEC, HBOS

North Korean leader Kim Jong-un Friday mocked Donald Trump as "mentally deranged" – and warned he will make the US president "pay dearly" for threatening the destruction of his country at the United Nations. Then hours later Ri Yong Ho, the North Korean foreign minister, raised the stakes suggesting Pyongyang could consider a hydrogen bomb test on the Pacific Ocean of an unprecedented scale. - Telegraph

00:01 US close: Markets end lower as investors digest Fed meeting, economic data

Stocks finished lower on Thursday, as traders tried to work out the implications of the US central bank's policy announcement on Wednesday, despite a raft of better-than-expected readings on the economy.