Publicly, Unilever (UN, UL) has declined Kraft’s (NASDAQ:KHC) $143B buyout offer. Behind the scenes, Unilever execs are concerned about Kraft’s penchant for slashing costs and its and lack of vision for cultivating brands, sources say, adding that Kraft also lacks experience managing home and personal-care businesses, which account for 60% of Unilever’s revenue.
“While both companies sell food, Unilever has pursued higher-end brands, such as Ben & Jerry’s ice cream and Talenti gelato. Kraft, meanwhile, sells Velveeta and Jell-O.”
“If I was Unilever, I would fight this with hand and fist,” Vivaldi branding expert Erich Joachimsthaler says. “It would crush everything we celebrate about Unilever.”
Unilever jumped 13% on Friday to a record high, while Kraft rallied 11%. The rallies make it more likely that Kraft will increase its offer, a source says. Another source notes that an acquisition would depend on financing from Kraft’s largest investor, Berkshire Hathaway (BRK.A BRK.B).
The unsolicited approach from Kraft took Unilever by surprise, sources said. Executives didn’t expect an offer from Kraft because they see the companies as too different. The question is whether Unilever’s investor base will see Kraft as a strategic fit; note that BlackRock (NYSE:BLK) is its largest shareholder (8%). One possibility is that Kraft comes in with a new offer targeting only Unilever’s food interests (Jefferies). Another possibility is that Unilever could seek a white-knight suitor such as (NYSE:CL) or Kimberly-Clark (NYSE:KMB) (Stifel). Of course, Unilever may just angle for a higher price.