Bestfoods Accepts Unilever’s Increased Bid
Bestfoods on Tuesday agreed to a sweetened buyout offer from Unilever of $20.3 billion, or $73 a share, that would create the world’s biggest food maker.
The Anglo-Dutch company won over Bestfoods Chairman Charles Shoemate by raising its cash offer a month after he rejected a bid for $66 a share. Shoemate opened merger talks with Campbell Soup Co., Diageo and H.J. Heinz Co., people close to the situation have said. That put pressure on Unilever, securing for Bestfoods holders 44% more than the stock’s price at the time of the first bid.
Bestfoods, whose brands include Skippy peanut butter, Entenmann’s baked goods and Knorr soups, disclosed Unilever’s first bid, of $18.1 billion, May 2.
Unilever, which makes Lipton tea, Ragu sauces and Breyers ice cream as well as Dove soap and Suave shampoo, would assume about $4 billion of debt in the deal. The companies together had $52.3 billion in 1999 sales, surpassing Switzerland’s Nestle’s $49.7 billion in revenue.
Analysts said the proposed deal is the first of several acquisitions expected in the U.S. food industry, where sales-volume growth has slowed to about 2% to 3% a year.
Nabisco Holdings Corp., the biggest U.S. cookie and cracker maker, could be the next transaction, analysts said. Nabisco Group Holdings Corp., which owns 80.5% of the maker of Oreo cookies and Ritz crackers, said in April that it would consider selling itself or that stake.
Unilever said cost savings from combining the companies are expected to reach $750 million as it integrates distribution and marketing operations. Unilever said the transaction would add to cash earnings in the first full year of operation.
Job cuts “will be decided as we go forward,” said Unilever spokesman John Gould. “We’re not at the point where we’ll say exactly where they are.”
In February, Unilever said it would eliminate 25,000 jobs, or 10% of its work force, in the next five years to cut costs. To boost sales, Unilever focused on its 400 strongest brands, while culling about three-quarters, or 1,200, of its lesser-known product lines.
Unilever also has been buying brands known worldwide. In April, it agreed to buy SlimFast diet foods and Ben & Jerry’s ice cream for $2.6 billion.
The agreement with Bestfoods ends a monthlong standoff. Unilever’s co-chairmen, Antony Burgmans and Niall FitzGerald, flew to New York late last week to try to engage Bestfoods in talks. Negotiations began over the weekend, people familiar with the situation said.
Bestfoods decided Monday night to suspend a planned $15-billion bid for Campbell Soup in order to advance those talks, the people said.
Shares of Bestfoods jumped $6.19 to close at $69.19, and Unilever’s American depositary receipts closed up 56 cents at $27.50, both on the New York Stock Exchange. Campbell Soup fell $1.56 to close at $29.56, also on the NYSE.
