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Unilever ups food fight
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May 3, 2000: 4:28 p.m. ET
Anglo-Dutch giant asks Bestfoods to reconsider rejection of $18B offer
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NEW YORK (CNNfn) - Anglo-Dutch packaged food company Unilever PLC Wednesday presented Bestfoods with a Thursday evening deadline to reconsider its $18.3 billion friendly takeover bid, even as analysts suggested it would take at least another $1 billion in cash to seal a potential deal.
Unilever, Europe's largest food company, confirmed its "non-public" proposal to buy the Englewood Cliffs, N.J.-based maker of Skippy peanut butter, Hellmann's mayonnaise and Knorr soups for $66 per share -- an offer summarily rejected Tuesday by Bestfoods as being "financially inadequate."
Unilever officials expressed their disappointment in Bestfoods decision to spurn their offer, and called on the company to reconsider its proposal. But analysts said the company could bring at least an additional $4 per share, bringing a total deal value to roughly $19.4 billion, not including debt.
 "While Bestfoods rejected the initial offer, we still think they will get together in a friendly deal closer to $70 per share," said John O'Neil, a food industry analyst with PaineWebber. "I think Unilever is the only buyer here."
Investors seemed to agree. Bestfoods (BFO: Research, Estimates) shares rose 10-7/8, or nearly 23 percent, to 61-7/16 in early afternoon trading, while Unilever (ULVR) closed down 9 percent to 349 pence in trading on the London Stock Exchange.
Late Wednesday morning, Reuters, quoting banking sources, reported Unilever was assembling a $20 billion syndicated loan to finance the acquisition despite Bestfoods resistance. A Unilever spokesman could not confirm the loan.
But such a loan, if assembled, would indicate that the company has left itself some additional wiggle room to either raise its offer price or finance a hostile takeover bid. At the company's annual meeting Wednesday, Unilever's Chairman Niall FitzGerald hinted that the company would not rule out a hostile bid if friendly negotiations fail.
FitzGerald also noted his company's current bid represented a 30 percent premium above Bestfoods' closing price Friday, and was 10 percent above the stock's all-time high. He said the current offer level would still allow the deal to be accretive to Unilever's earnings by its second year of operation.
But Bestfoods Chairman C.R. Shoemate told CNNfn's "In the Money" that given the current slump in food industry stocks, it was not appropriate to take "a one-time spot price and not give our shareholders the rewards of what has been a very high-performance company."
"Based on our track record, our financial history and success that we've demonstrated and the business positions we have around the world ... if you take that in light of the sort of temporarily depressed situation in the food industry, we believe that it's not an appropriate bid," he said.
 Meanwhile, analysts doubted another bidder would step into the fray. They noted Nestle SA -- the world's No. 1 food company -- was the only other potential acquirer with the financial wherewithal to make a competing bid, but faced much higher regulatory hurdles to get such a deal approved because of multiple product overlaps.
"I'm not sure anyone has the pocketbook to compete with Unilever here," said John McMillin, an analyst with Prudential Securities Inc. "Nestle is a possible one, but one that would be more vulnerable to antitrust concerns."
Overlap would be of little concern to Unilever, which concentrates mainly on such consumer goods as Q-Tip cotton swabs, Vaseline ointment and Dove soap, as well as food products Lipton tea and Country Crock spread.
The company's appetite for food companies has been particularly strong recently. Just last month, it inked deals to gobble up U.S. diet foods maker Slim-Fast Foods for $2.3 billion and novelty ice cream company Ben & Jerry's (BJICA: Research, Estimates) for $326 million.
At the same time, Unilever has been tightening its belt, announcing plans both to slash its portfolio of brands by three-quarters to about 400 products and to cut 25,000 jobs.
Analysts largely hailed a possible Unilever/Bestfoods union, noting the combined company would give Unilever the substantial U.S. presence it has been seeking while further boosting its international operations, where two-thirds of Bestfoods sales are currently generated.
Some theorize it could also jump-start the long-awaited consolidation in the food industry, where many stocks have suffered during the past year under investors' distaste for so-called "old economy" stocks.
As a result slow growth, relatively low profit margins, and the increasing size and bargaining power of their major customers - supermarkets - have forced food makers to look for ways to pep up profit growth rates.
Bestfoods reportedly walked away from negotiations with ketchup maker Heinz (HNZ: Research, Estimates) last September, although the two companies never admitted they discussed a merger. 
-- from staff and wire reports
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