NEW YORK (CNNfn) - Unilever PLC officials have discussed several takeover scenarios with Bestfoods that would value the U.S. diversified food company at more than $70 per share, but the talks have not produced a formal offer, people familiar with the situation said Friday.|
The talks, which picked up pace this week, come amid new reports that Bestfoods has stepped up its efforts to pursue an acquisition of its own -- a move that could lead to an even higher offer from Unilever or dissuade the Anglo-Dutch consumer goods company's takeover efforts altogether.
The talks between Bestfoods (BFO: Research, Estimates) and Unilever are still far from reaching a serious level, and no formal talks currently are planned between the two sides, the sources cautioned. Unilever (UN: Research, Estimates) first approached Bestfoods about a possible merger in May, but its $66 per share offer was rebuffed as inadequate.
Spokesman from Unilever and Bestfoods both declined to comment Friday. A bid exceeding $70 per share could value the company in excess of $20 billion.
Word of a possible revised deal, first reported in Friday's Wall Street Journal, failed to excite investors, however, who pushed Bestfoods shares down 15/16 to 64-15/16 amid a broad market rally.
Analysts said the decline was likely due to investor disappointment that Unilever wasn't offering even more money for the Englewood Cliffs, N.J.-based maker of Skippy peanut butter, Hellmann's mayonnaise and Knorr soups. Analysts and traders have theorized that the company will ultimately fetch upwards of $75 per share.
"I think $70 will probably get them to the table and $72-to-$75 will close the deal," said Terry Bivens, a food industry analyst with Bear Stearns.
Analysts said investors are also wary of Bestfoods discussions with other possible acquisition targets, including U.K. food and drink company Diageo -- a tactic known as a "scorched earth" defense. The Journal reported Friday that Bestfoods has entered "serious discussions" with the troubled Campbell Soup Co. (CPB: Research, Estimates) about a possible acquisition. Campbell declined to comment on the report.
Acquiring a company like Campbell could ultimately make a deal with Unilever less likely because it creates additional overlap with Unilever's current operation and product line -- making it harder to wring synergies out of the transaction.
Still, people familiar with the transaction say Bestfoods is coming under increased pressure from its top shareholders to abandon its talks with other companies and pursue a deal with Unilever, viewed by many as the most natural strategic fit for the company.
Some traders view Bestfoods talks with various third parties as a ploy to extract a sweetened bid out of Unilever. But the Anglo-Dutch company has shown extraordinary patience in its courtships in the past, most recently in its recent merger discussions with novelty ice cream maker Ben and Jerry's Homemade Inc. (BJICA: Research, Estimates), which it finally acquired in April for $326 million after six months of on-again, off-again negotiations.
Unilever executives have thus far not ruled out a hostile bid for the company, but are wary of following that strategy because they don't want to alienate Bestfoods management, whom they hope will stay on and run the operation after a merger.
"We want to address this without alienating the management of the company," one source close to the company said.
Unilever's American depository receipts (ADRs) fell 1/2 to 49-13/16.