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Bestfoods talks in standoff
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May 12, 2000: 10:28 a.m. ET
No meetings set on Unilever $18.3B bid; each side waits for the other to blink
By Staff Writer Tom Johnson
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NEW YORK (CNNfn) - Unilever PLC's unsolicited $18.3 billion courtship of U.S. diversified food company Bestfoods has evolved into a chilly standoff with both sides believing the other should make the next move, leaving investors to rethink the likelihood of a possible deal.
Sources from both companies indicated Thursday evening that the two sides had not held a meaningful conversation since late last week, when Unilever Chairman and CEO Niall FitzGerald called his counterpart at Bestfoods, Charles Shoemate, urging him to open discussions about a possible union. The call came just days after Bestfoods rejected Unilever's acquisition offer valuing the company at $66 per share.
A source with knowledge of Unilever's thinking said the company believes increased pressure from institutional shareholders ultimately will force Englewood Cliffs, N.J.-based Bestfoods, maker of Skippy peanut butter, Hellmann's mayonnaise and Knorr soups, to open a formal dialogue. Unilever, Europe's largest consumer products maker, has shown little interest so far in raising its bid before that happens.
However, a source in Bestfoods' camp indicated that while the company's top shareholders have voiced some support for a merger, there has been little pressure on company executives to start negotiations until a better offer is put on the table.
 Investors, meanwhile, appear to be growing weary of the ongoing stalemate.
Bestfoods shares retreated 5/8 to 64-5/16 shortly after the opening bell Friday after closing down 13/16 at 64-15/16 Thursday, even though the stock at one point climbed above the $66 per share Unilever valued the company. Still, despite the pullback, the shares remain well above their 52-week low, set in March, of 35-3/4.
Analysts said talks eventually will heat up again -- most likely next week when both companies' chairmen will be in New York for the same investor conference -- noting there is little chance Bestfoods (BFO: Research, Estimates) shareholders would let the company walk away from a deal.
"It's a game of poker right now," said John McMillin, an analyst with Prudential Securities. "My sense is it will heat up next week. You can can't respond to this by doing nothing."
Shareholders bucking for higher price
Bestfoods shareholders contacted by CNNfn largely indicated support for a merger with Unilever but continued to insist they believed the company is more properly valued at $70 to $75 per share.
"Ultimately, we'd like to see a deal done," said Mark Turner, an analyst with Turner Investment Partners, which holds roughly 46,500 Bestfoods shares, according to Morningstar Inc. "Unilever seems to be the best fit strategically for them. Other names have been thrown out there, but it's hard to match Unilever's worldwide distribution.
"We would accept $66 per share, but it seems like something in the range of $70 per share-plus is in the cards."
Shoemate told CNNfn last week that the $66 per share bid was "inappropriate" given his company's strong track record as an independent company.
However, Shoemate did not rule out opening discussions with Unilever if it is presented with a higher offer.
"They are not going to go back [to discuss the $66 per share bid]" one source with knowledge of Bestfoods' thinking said. "They were not for sale to begin with."
There has been some speculation that another bidder ultimately might enter the fray and force Unilever's hand. But analysts largely have discounted that possibility because the two most likely bidders -- H.J. Heinz (HNZ: Research, Estimates) and Nestle S.A. -- both would have to clear significant hurdles to make such a deal work.
Heinz, which reportedly has negotiated with Bestfoods about a merger of equals before, would have a difficult time digesting Bestfoods, analysts said, while a merger with Nestle would raise several antitrust concerns among regulators because of the companies' significant product overlap.
A Unilever/Bestfoods union would generate little overlap, however. According to data compiled by Unilever, the merger would create the global leader in culinary products, spreads, tea, ice cream and frozen foods.
Although no talks between the two are scheduled, both Shoemate and FitzGerald are scheduled to make presentations at an investor conference sponsored by Goldman Sachs in New York next week. The speaking arrangements were scheduled prior to Unilever's merger offer, made public last week. 
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