PITTSBURGH _ Kraft Heinz is on the acquisition trail again, with the food giant confirming Friday it offered to buy the consumer packaged goods company Unilever but had its offer quickly rejected.
The talks between the two companies came as a bit of a shock to traders, who had expected Kraft Heinz, dually headquartered in Pittsburgh and Chicago, to make a big play but expected it to target rivals more focused on food than Unilever is.
Despite Unilever's rejection, the negotiations aren't necessarily done. Such scenarios sometimes go a few rounds while the two sides debate price and look at their options.
News of the exchange surfaced after Kraft Heinz acknowledged reports that it had made a play for Unilever.
"Kraft Heinz 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.
Unilever later issued a statement that it saw no merit in a proposed merger, calling Kraft Heinz's $143 billion offer "fundamentally undervalues" the Anglo-Dutch consumer goods giant, according to Reuters.
Unilever said it had received an offer of $50 per share, made up of $30.23 in cash and the remainder in stock in the new group, representing a premium of 18 percent.
"Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever's shareholders. Unilever does not see the basis for any further discussions."
Kraft Heinz's statement Friday said it had "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."
That may not be the end of it, the company said.
"While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction."
A merger of the two companies would bring together a business that sells everything from condiments and sauces to baby food, frozen meals, canned beans and boxed macaroni and cheese to one that has food brands but also sells shampoo and detergent.
Unilever CEO Paul Polman in January noted that the company has been working to reshape its portfolio to keep up with a changing market, acquiring brands such as the Dollar Shave Club, Blue Air and Seventh Generation.
Kraft Heinz's statement added, "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 markets had been waiting for Kraft Heinz to make a big move, something that has become a bit of a pattern.
Private investment group 3G Capital combined with Warren Buffett's Berkshire Hathaway four years ago _ in a deal announced on Valentines Day _ to acquire the iconic Pittsburgh company H.J. Heinz Co.
Two years later, in March 2015, a deal was announced to merge Heinz with Illinois food company Kraft Foods Group.
Jefferies analysts on Friday issued a report on the Kraft Heinz move that called it a "seismic shock" to both Unilever and the broader European consumer industry.
"To say this approach is a surprise is an understatement," Martin Deboo and James Letten wrote in a note to investors.
They noted that the executives involved in 3G Capital and its companies see themselves as "an ambitious game-changer in the consumer industry based on a radically different perception of cost and margin.
"If (Unilever) loses its independence, it will have cause to reflect on what might have proved to be a too little, too late response to the market's demands for margin improvement and better cash generation."
The analysts said they expect Unilever's board to "demonstrate a keen appreciation of its value."
The analysts wrote that the Kraft Heinz offer is not considered a firm announcement under United Kingdom takeover rules, indicating that there is now a "put up or shut up" deadline on the offer of 5 p.m. London time, March 17.
Each previous deal involving 3G Capital and Heinz has set off a round of plant closings, layoffs, management shifts and efforts to operate the historic consumer packaged companies more efficiently.
The Unilever name was not among the more widely speculated targets for the next acquisition round, with analysts focusing more on companies such as Mondelez International, Campbell Soup, Kellogg and General Mills.
Shares of Kraft Heinz rose 10.7 percent in trading Friday, while Unilever shares jumped 14 percent.
Mondelez, which has been considered among the most likely acquisition targets for Kraft Heinz, saw its shares dip 1.6 percent.
