Kraft Heinz's (KHC) surprise play for Unilever plc (UNL) marks an interesting contrast to President Donald Trump's "Buy American, Hire American" economic policy, as the Warren Buffett-led food giant seeks growth in non-U.S. markets.
Kraft's $50 per share bid for the maker of Dove soaps and Ben & Jerry's ice cream values the group at around $143 billion, Unilever said Friday, but nonetheless has "no merit, either financial or strategic" for the company's shareholders.
They could be right: Unilever moved more than €52.7 billion ($56.2 billion) in merchandise last year, with more than half of that (€30.2 billion) coming from sales to emerging market economies like China and Brazil. That compares to net sales of $26.5 billion for Kraft Heinz, only 11% of which came from markets outside of the U.S., Canada and Europe.
And while Unilever grew sales and passed on price increases in all of its markets outside of Europe last year, Kraft wasn't able to manage year-on-year expansion in any, although stripping away currency changes gave it organic sales growth in Canada and its 'Rest of World' segment.
"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," the company said in a statement. "While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction."
Kraft is a food company, purely and simply, with a heavy reliance on U.S. sales, where price increases are difficult to pass on and shopping habits and tastes are seemingly changing by the hour.