(Reuters Breakingviews) - Kraft Heinz shares reached their zenith two years ago,...
PARIS - Kraft Heinz shares reached their zenith two years ago, the day Unilever rejected an unwanted takeover approach from the aggressive maker of ketchup and processed cheese. Its Anglo-Dutch quarry’s stock also got a boost. How the tables have turned. The Cheez Whiz giant has melted down since offering to buy Unilever: its $40 billion market value is now just a quarter of its erstwhile prey’s. Unilever, meantime, has blossomed into a $155 billion behemoth.
The divergent fortunes of Kraft and Unilever since their dalliance would suggest the Friedman view embraced by Kraft’s top owners is outdated, and the more expansive one, which undergirded Unilever’s lightning defense against Kraft’s bid, is ascendant. But in that brief interlude when Unilever was forced to weigh all its strategic options, one that emerged is what investment bankers call a “Pac-Man defense,” where a takeover target flips the script and bids for its would-be acquirer.
Consider the arithmetic of a hypothetical Unilever bid mimicking Kraft’s from two years ago. At a 20 percent premium to current market prices, a bit more than the markup Kraft offered, a deal would cost Unilever about $48 billion. At the same ratio of cash and stock as Kraft had proposed, that would leave Unilever needing to hustle up $29 billion in cash.
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