We believe Kraft will likely need to raise its offer substantially if it hopes

We believe kraft will likely need to raise its offer

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“We believe Kraft will likely need to raise its offer substantially if it hopes to change the outcome,” RBC Capital Markets analyst David Palmer said in a research note. Kraft’s move could flush out other bidders for Unilever, but of the potential rivals, U.S consumer giant Procter & Gamble Co. may face antitrust hurdles, while pharmaceutical and consumer- packaged goods company Johnson & Johnson would likely not be interested in household products. Unilever has a larger presence than some peers in emerging markets, which were once the big driver of industry growth, but which have slowed in recent years. It is also feeling the after-effects of Britain’s decision to leave the European Union, with a fall in the pound currency raising the cost of producing consumer goods in Britain and straining relations between the country’s retailers and suppliers.
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“Unilever has struggled to achieve top-line revenue growth for years and has achieved profit growth through improving the product mix and cutting costs. A tie-up with Kraft Heinz would enable it to continue to improve profits in the same way,” Jonathan Bell, chief investment officer at Stanhope Capital, said in an e-mail. 3G READY TO DEAL Although Kraft is smaller than Unilever, with a market value of $106-billion as of Thursday, it is 50.9-per-cent owned by Mr. Buffett’s Berkshire Hathaway and 3G Capital, which also controls Anheuser-Busch InBev SA. 3G, known for driving profits through aggressive cost cutting, has orchestrated a string of big deals rocking the food and drink industry, including AB InBev’s takeover of SABMiller and the combination of Kraft and Heinz. A deal would offer opportunities to combine marketing, manufacturing and distribution in addition to cutting costs, but some industry analysts said Kraft might not want Unilever’s household and personal-goods brands and could spin them off. “This is cheap money meeting industrial logic,” said Steve Clayton, manager of the HL Select UK Shares fund at Hargreaves Lansdown, which owns Unilever shares. “Kraft Heinz are attempting a massive push on the fast-forward button … to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades,” Mr. Clayton added. Britain’s largest union, Unite, expressed immediate concern about potential job losses if Unilever fell under Kraft’s control. Unite urged Unilever to continue fending off the takeover attempt. A recent wave of cross-border deals in Europe is leaving British businesses vulnerable to possible job cuts. Groupe PSA’s proposed acquisition of General Motors’ Opel business may eventually lead to heavy restructuring at the Vauxhall brands, which employ 4,500 people in Britain, sources said. Center view and Morgan Stanley are working with Unilever alongside UBS and Deutsche Bank, which are also acting as corporate brokers. Kraft is working with Lazard.
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  • Winter '20
  • H. J. Heinz Company, Kraft Foods, Kraft Heinz, Nelson Peltz

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