Kraft Heinz (KHC) , you sly little devil.
The maker of Kraft mac and cheese and Heinz ketchup on Friday said it approached consumer products giant Unilever (UL) with a $143 billion offer. Financing for the proposed combination, according to a report from the Financial Times, would reportedly come from noted package food industry players 3G Capital and Warren Buffett. Unilever rejected Kraft Heinz's approach.
"Kraft 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," Kraft Heinz spokesman Michael Mullen told TheStreet via email. Unilever said the purchase price, which amounts to $50 a share, "fundamentally undervalues" the company.
Kraft Heinz shares rose 7.3% to $93.71 in early trading, while Unilever rose as much as 10% to $46.53.
The deal may not be as weird as it looks from the outside.
"This is cheap money meeting industrial logic. Putting portfolios of brands together can create huge synergies across marketing, manufacturing and distribution, even before you think about cutting the combined headquarters back to size. Kraft Heinz is attempting a massive push on the fast forward button, for to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades. With debt cheap and abundant right now, Kraft have spotted their opportunity," Hargreaves Lansdown analyst Steve Clayton said.