Kraft to pursue Unilever after $143bln bid spurned

New York: Kraft Heinz signaled on Friday it will press ahead with a campaign to acquire Dutch-British consumer products giant Unilever after an initial bid worth about $143 billion was spurned.

A deal would create a giant in global food, joining the maker of Kraft cheese and Heinz ketchup to its European counterpart, whose products include Q-tips, Hellmann's mayonnaise and Ben & Jerry's ice cream.

Unilever said the offer of an 18 percent premium to Thursday's stock price "fundamentally undervalues" the company and it "does not see the basis for any further discussions."

But Kraft, acknowledging its rejection, said "we look forward to working to reach agreement on the terms of a transaction," although there was no guarantee of a deal.

Shares of both companies surged following the news, suggesting the market believes the mega-deal in the global food industry could happen. In early trading, Kraft Heinz jumped 7.5 percent to $93.81, while Unilever surged 9.5 percent to $46.62.

But analysts said the potentially massive merger could raise red flags for antitrust regulators over the effect on consumers, and for politicians given the potentially large job cuts.

"If the deal does see the daylight, this simply means more job loss for UK and more pain for consumers as competition will erode," said Naeem Aslam, analyst at Think Markets, a market analytics and trading firm.

Kraft's pursuit of Unilever comes as global food companies struggle with anemic economic growth in many key markets. It also would permit the American company to take advantage of a buoyant US dollar at a time when the British pound is under pressure following the Brexit vote.

Kraft Heinz on Thursday reported a year-over-year drop in fourth quarter sales, due in part to 13.3 percent decline in Europe, a region chief executive Bernardo Hess called "weak" on an analyst conference call.

Kraft Heinz is the fifth-biggest food and beverage company in the world and the third-biggest in North America. It was formed by the 2015 merger struck between Heinz´s controlling shareholders, US billionaire Warren Buffet´s Berkshire Hathaway, and 3G Capital of Brazil.