Kraft Heinz Co. eyeing Unilever acquisition

by Keith Nunes
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Kraft Heinz Unilever
The Kraft Heinz Co. has made an offer to acquire Unilever PLC.

PITTSBURGH – The Kraft Heinz Co. has made an offer to acquire Unilever PLC, which the London-based company declined.

Michael Mullen, Kraft Heinz
Michael Mullen, senior vice-president of corporate and government affairs for Kraft Heinz

“While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction,” said Michael Mullen, senior vice-president of corporate and government affairs. “There can be no certainty that any further formal proposal will be made to the boards of Unilever or that an offer will be made at all or as to the terms of any transaction.”

The offer, according to Unilever, was for $50 per share, which included $30.23 in cash and the remainder in stock, for a total valuation of approximately $143 billion. The company rejected the offer, saying it was too low.

Unilever is a significantly larger business than Kraft Heinz. Its earnings in 2016 were €5,370 million ($5,734 million), 66% greater than $3,452 million at Kraft Heinz, and Unilever sales of €52,713 million ($56,266 million) were more than double Kraft’s $26,487 million.

Unilever adjusted earnings growth in 2016 was a modest 3%. Paul Polman, chief executive officer characterized the results as “good all-around performance” affected by “severe economic disruptions, particularly in India and Brazil, two of our largest markets.”

The challenging environment was projected to continue into 2017.

“The tough market conditions which made the end of the year particularly challenging are likely to continue in the first half of 2017,” Mr. Polman said. “Against this background, we expect a slow start with growth improving as the year progresses.”

Unilever operates three principal divisions: The Americas, Europe and a combination of global clusters, Asia, AMET (Africa, Middle East and Turkey) and RUB (Russia, Ukraine and Belarus). In 2016, 43% of sales were in developed markets and 57% were in emerging markets.

A combination of Kraft Heinz and Unilever would create a company with sales of approximately $83 billion and a global footprint that extends throughout food and beverage and into the personal care categories. 

The news of Kraft Heinz’s interest in Unilever came a day after Kraft Heinz issued its financial results for fiscal 2016 in which the company earned $3,452 million, equal to $2.84 per share on the common stock, for the year ended Dec. 31, 2016, and compared with $861 million on a pro forma basis, or 72c per share, in the prior fiscal year. Net sales were $26,487 million, down from pro forma sales of $27,447 million.

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