Executives at Unilever (UL) probably started their Friday in uncharted territory.
Kraft Heinz' (KHC) approach for Unilever comes both as a surprise and "seismic shock" to both Unilever and the broader European consumer space, Jefferies analysts Martin Deboo and James Letten said in a note Friday. The analysts said that Kraft has radically different cost and margin aspirations.
The maker of Kraft mac and cheese and Heinz ketchup on Friday said it approached consumer products giant Unilever 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 8.3% to $93.71 in afternoon trading, while Unilever rose as much as 10% to $46.53.
A more logical move for Kraft would be for it to acquire Unilever's foods business, which has sales of 12.5 billion euros, Jefferies analysts said. Unilever owns brands such as Hellmann's mayonnaise and Breyers ice cream.