Europeans May Not Be Done Shopping in U.S.

Brokerage Merrill Lynch on Thursday added fuel to speculation that the U.S. food industry is poised for more consolidation, naming cereal and beverage company Quaker Oats (OAT) and pet food giant Ralston Purina (RAL) as prime takeover targets for European shoppers.

Merrill’s report on potential food targets came on the heels of last week’s $18.4-billion unsolicited offer for Bestfoods (BFO) by Anglo-Dutch consumer products group Unilever (UN), and just days before the May 15 deadline for the first round of bidding in the auction for Nabisco Group Holdings (NA).

“Recent events have moved the theoretical into the practical,” Merrill’s food team, led by analysts Leonard Teitelbaum and Eric Katzman, said in the report. “As such, we have taken the position that Europe is shopping and its primary store is the U.S.”

Unilever’s bid for Bestfoods, which the Englewood Cliffs, N.J.-based maker of Knorr sauces and Hellmann’s mayonnaise has rejected as inadequate, and Nabisco’s move to put itself on the auction block in April have been widely viewed as the tinder to spark long-awaited industry consolidation.

Quaker, increasingly best known for its Gatorade sports drink, surged $2.25 to $72.06 on Thursday while Ralston gained 31 cents to $18.38, both on the New York Stock Exchange. Both could appeal to such Euro giants as Swiss group Nestle or French food group Danone, Merrill said.