Kraft Heinz confirms it has approached Unilever about a deal that values the company at $143bn
Closing summary: Unilever shares close at record high
Breaking: Mega merger approach for Unilever
Unilever says proposal has no merit
Unions fear job cuts
Kraft Heinz offers £40 per share; Unilever jump to £38.
Expert reaction starts here
5.09pm GMT
Hang on.... Moody’s have just warned that it might take a dimmer view of Unilever’s credit worthiness, if this deal happens.
Ernesto Bisagno, Senior Analyst at Moody’s, explains:
“Whilst it is still early days, Kraft Heinz’s offer for Unilever’s shares would be credit negative for Unilever’s bondholders, as 2017 pro-forma combined leverage would likely rise significantly - excluding cost savings and synergies - from the moderate 2.0x Unilever currently shows on a standalone basis.
Also, Kraft Heinz’s current rating is Baa3 and thus five notches lower than Unilever’s A1 rating.”
5.06pm GMT
The London stock market has closed the week..and Unilever shares have ended the day up 13.5% higher at £37.97.
That’s a new alltime closing high, and not far from the £40 per share which Kraft Heinz has proposed paying, in an offer that has electrified the City of London.
For now the approach has been rebuffed, and in relatively robust language from the tone of Unilever’s response. Until today Unilever shares had steadily underperformed the FTSE 100 over the past six months, left behind by more glamorous sectors such as mining, but today has seen that situation reverse.
Backed by Warren Buffett, Kraft is likely to return for another tilt at the prize, with a bid of this size unlikely to have been made without careful consideration.
Related: Unilever rejects Kraft Heinz's £115bn takeover approach
4.03pm GMT
While Unilever’s shares have soared, the company’s bonds have taken a slip.
Investors are worrying that it might take on a lot more debt if the Kraft Heinz deal goes though, potentially weakening its credit-worthiness.
Longer dated @Unilever bonds down as much as 4% on approach from @KraftHeinzCo. Market fears significant debt increase pic.twitter.com/kQDvcvuB4f
3.40pm GMT
Hat-tip to the Wall Street Journal’s James Mackintosh:
It's definitely a Marmite deal. Kraft loves it, Unilever hates it.
3.29pm GMT
John Colley, a Professor of Practice at Warwick Business School, believes the unions are right to worry about job cuts.
He says:
The main benefits from such a deal would be major cost reduction as head offices and regional management could be merged. There would also be some purchasing benefits from increased buying power.
3.06pm GMT
Changing attitude to food has put pressure on Kraft Heinz to pursue a merger, argues Mark Jones, a solicitor and food and drink industry expert at Gordons law firm.
“Consumer choices are changing, we are moving away from processed foods and towards fresh. Millennials will soon surpass the baby boomer generation as the largest living generation and millennials are not keen on processed food.
“The packaged food businesses have seen their sales growth slow in the last few years and because of this they are looking at ways to preserve margins. One way to do this is merge and take the benefit of economies of scale. The deal would make a lot of sense”.
2.59pm GMT
Others spreads, drinks and sauces are available, of course...
If Kraft Heinz and Unliever merge you will basically never eat a meal without something they make in it ever again until you die. pic.twitter.com/c99SXu8CEu
2.31pm GMT
The Unite union, which represents Unilever workers, is urging the company to reject Kraft Heinz’s ‘predatory’ takeover bid.
It fears that a takeover would lead to job cuts, and a drop in quality, as the US firm tries to squeeze costs out.
“Unite is seeking an urgent meeting with Unilever senior management where we will seek assurances that the company will resist this predatory takeover by Kraft Heinz.
“Unite members make household products which are much loved by UK consumers. Kraft Heinz and their backers’ reputation for cost cutting, we believe, will lead to great brands being harmed through job cuts and a never ending drive to push costs down.
2.22pm GMT
Antitrust regulators might have issues with such massive companies merging, says ETX Capital’s Neil Wilson.
Would competition authorities let this one through?
It could come up against a number of hurdles as it would create a giant in the sector. EU regulators in particular could be against it.
2.18pm GMT
Naeem Aslam of Think Markets has warned that jobs could be lost, and consumers could also suffer, if the deal goes through.
He says:
We anticipate that this has a lot to do with Brexit as well. Theresa May has not triggered the Brexit yet, the effects of this have started to surface. Perhaps, predators see a lot of blood and opportunity and falling sterling has produced enough blood on the street for firms around the world to look and cash on opportunities. They are coming out with big bazookas and trying to make deals which we have not seen. You can not blame them because tt is cheap for them and the time is right. So we do not think Kraft Heinz is going to back down anytime soon.
If the deal does see the daylight, this simply mean more job loss for UK and more pain for consumers as competition will erode.
1.58pm GMT
Steve Clayton, fund manager at Hargreaves Lansdown, believes Kraft Heinz will need to raise its offer substantially, to get enough Unilever shareholders onside.
‘This is cheap money meeting industrial logic. Putting portfolios of brands together can create huge synergies across marketing, manufacturing and distribution, even before you think about cutting the combined HQ back to size. Kraft Heinz are attempting a massive push on the Fast Forward button, for to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades. With debt cheap and abundant right now, Kraft have spotted their opportunity.
Unilever were clearly in no mood to sell, having spurned the first advance, but Kraft Heinz are not put off. But what will Unilever’s shareholders have to say? The long term boost to portfolios that Unilever has delivered has been enormous. A short term premium today is no compensation for losing the growth that Unilever could produce for decades to come. So to win over a majority of Unilever’s shareholders, we think Kraft Heinz will need to dig very deep indeed.’
1.52pm GMT
This chart shows how Unilever shares surged to fresh record highs, driving its value towards the $143bn on offer from Kraft Heinz.
Unilever adds near $19 bln in market cap in 80 mins of trading after Kraft-Heinz merger proposal #stocks https://t.co/Obf0MBWtcq @MartinneG pic.twitter.com/4PpYqptyMA
1.47pm GMT
Dutch TV journalist Durk Veenstra suspects that Unilever would accept a higher offer:
#Unilever says preliminary offer Heinz Kraft (of $50 / €47 per share) undervalues Unilever. Read: make a better offer and we will say 'yes'
Kraft Heinz approached Unilever about a tie-up, and was rebuffed. With the weak pound, U.K. companies are targets. https://t.co/a20ae3Kj50
Unilever is held up as a company with a great reputation founded on solid values. Not sure Kraft would be a good match... https://t.co/0vw9s9YLkN
1.27pm GMT
So, we now know that Kraft Heinz has offered to pay around $50 per Unilever share. That’s around £40, at the current exchange rate.
Unilever’s shares are now trading around £37.65 per share, up from £33.60 this morning.
1.23pm GMT
Newsflash: Unilever has just issued a statement to the City, confirming that it rejected Kraft Heinz’s approach.
The Anglo-Dutch firm reveals that Kraft Heinz offered to pay $143bn (or nearly £115bn), in a mixture of cash and its own shares.
Unilever notes the recent announcement by The Kraft Heinz Company (“Kraft Heinz”) that it has made a potential offer for all of the shares of Unilever PLC and Unilever N.V.
Their proposal represents a premium of 18% to Unilever’s share price as at the close of business on 16 February 2017. This fundamentally undervalues Unilever. Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever’s shareholders. Unilever does not see the basis for any further discussions.
1.15pm GMT
Warren Buffett, one of the world’s richest men, is right at the heart of this merger bid.
Unilever rejected Kraft merger approach. @taralach reads btn Kraft's top and bottom lines https://t.co/FNKkq3esYj pic.twitter.com/PYq6wLJAAi
1.02pm GMT
Shares in Kraft Heinz have jumped by over 3% in pre-market trading in New York.
12.57pm GMT
Between them, Unilever and Kraft Heinz control many of the world’s most popular consumer brands.
Unilever produces washing powder (Persil and Surf), spreads (Flora and Bertolli), ice cream (Ben & Jerry’s, Magnum and Cornetto), personal care items (Dove, Sure, and Vaseline), and cleaning products (Domestos and Cif).
Biggest thing in spread ever — Hellman's, Marimite, Heinz ketchup, Philadelphia cheese could be under same roof https://t.co/1fY7iQ5r4I
12.45pm GMT
If this deal goes through, it would be one of the largest takeover deals ever.
Unilever’s market capitalisation has surged to over £100bn since the FT broke the news that Heinz Kraft has made an approach.
Unilever shares rally to record high after Kraft Heinz proposal, which Unilever rejects pic.twitter.com/ACy3ikCWa2
12.24pm GMT
Shares in Unilever have surged by 11% after Kraft Heinz confirmed that it has approached the company about a merger.
They’ve jumped from £33.60 to over £37 per share, as traders bet that a deal will be done - despite Unilever’s initial rejection.
12.19pm GMT
Big breaking news..... Kraft Heinz, the food giant, has approached Anglo-Dutch consumer chain Unilever over a merger.
Kraft has just issued a statement to the City, revealing that it approached Unilever with a proposal to merge the two companies.
The Kraft Heinz Company (“Kraft”) notes the recent speculation regarding a possible combination of Kraft and Unilever plc / Unilever NA (“Unilever”).
Kraft confirms that it has made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living. While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction. There can be no certainty that any further formal proposal will be made to the Board of Unilever or that an offer will be made at all or as to the terms of any transaction.
Potential Kraft/Unilever merger https://t.co/4Qjktyj08v
12.07pm GMT
City traders are betting that the retail sales slowdown has cut the chances of UK interest rates rising anytime soon.
The pound fell as low as $1.2388, down almost a cent.
11.01am GMT
There’s an argument that the fall in UK consumer spending over the last few months could be a good thing, in the long run at least.
After all, economists have long worried that Britain’s economy was too reliant on its nation of shoppers. Perhaps a rebalancing is now taking place...
“It might not be what businesses want to hear but I’m pleased we’ve started to reign in our spending a little after our big splurge at the end of the year.
We can’t keep on spending like there’s no tomorrow as it’ll cause massive problems later on. Households are going to feel the pinch as prices start to rise and we all need to be a little more sensible with our money. Sorting out a decent budget and being measured with your spending is the best thing to do right now.
Sluggish wage growth and rising inflation would mean we no longer may be able to depend on consumers keeping the economy buoyant.
However this could also be a good thing in the long term. Former Chancellor George Osborne always emphasised that the economy had to rebalance away from borrowing, consumption and imports to saving, manufacturing and exports. This rebalancing requires greater saving and less consumption and therefore the consumers have to retrench. This will be negative for the economy in the short-term but could mean a more balanced UK economy in the longer run.”
10.43am GMT
Ranko Berich, head of market analysis at Monex Europe, also fears that Britain’s consumers spending is faltering, following the drop in retail sales over the last three months.
January’s report represents the first fall in three month on three month sales since December 2013, and suggests the underlying trend is indeed taking a turn for the worse.
The prospect of a sustained dip in consumer spending is a sobering one for sterling, which has been supported by strong macro data during the political uncertainty of the last few months.”
10.40am GMT
Today’s retail sales figures provide clear evidence that consumer spending will be squeezed this year, says Andrew Sentance, senior economic adviser at PwC.
A sharp turnaround in the inflation environment has put a sharp brake on the growth of retail spending - and we are likely to see more of the same as we move through 2017 and next year.
“In 2015 and the first half of last year, falling prices on the high street and at the petrol pump boosted the volume of retail spending. Shop and motor fuel prices were falling by 2.5% to 3% a year over this period and this supported 4.5%-5% growth in the volume of retail sales.
“By contrast, this January we have seen a rise in prices in the retail sector - which are now nearly 2% up on a year ago. Not surprisingly this change in the inflationary trend has squeezed the growth in the volume of retail spending to just 1.5% compared with last year.
10.09am GMT
Today’s figures show that the slump in sterling since the Brexit vote is now hitting the retail sector, argues Neil Wilson of ETX Capital.
All the numbers today show a downward trend and the anticipated knock to consumer spending from rising inflation may already be evident.
Households are clearly starting to feel the effects of the pound’s fall in value and this will only get worse as prices rise over the coming months as hedging contracts expire.
10.04am GMT
The CBI’s principal economist, Alpesh Paleja, is also worried by the fall in UK retail sales -- it could show that consumers are cutting back.
Big weakening in underlying #retail sales growth over the last couple of months. Could signal beginning of slower consumer spending growth. pic.twitter.com/gL3KZ9vgmr
10.01am GMT
The slowdown in retail spending over the last quarter shows that consumers are tightening their belts, argues Howard Archer of IHS Global Insight:
#UK #retail sales volumes fell 0.3% m/m in Jan after 2.1% dip in Dec. Y/Y growth limited to 1.5%. #Consumers may now be reining in spending
If #consumers really are now reining in spending as hinted by Jan/Dec #retail sales volumes, #UK growth slowdown may be about to materialize
Bad UK retail sales.
-0.3% in Jan, first time since 2000 they've fallen 3 months in a row; Dec revised to -2.1% third biggest fall in 21 yrs pic.twitter.com/wFYwyHyrft
Retailers are only just starting to implement big price rises due to the lower £. Sales figs will continue to disappoint over coming months pic.twitter.com/rCiqhGPrt6
9.49am GMT
This chart shows the big picture in UK retail - prices are going up, and the amount of stuff we can buy is going down.
9.45am GMT
The pound has fallen sharply after today’s retail sales missed forecasts, shedding over half a cent to $1.242
9.39am GMT
Breaking: UK retail sales have fallen for the third month running, fuelling concerns that consumers are cutting back as inflation rises.
The volume of goods sold online and on the high street shrank by 0.3% in January. That follows a downwardly-revised 2.1% plunge in December.
In the three months to January 2017, retail sales saw the first signs of a fall in the underlying trend since December 2013.
The evidence suggests that increased prices in fuel and food are significant factors in this slowdown.”
9.02am GMT
All the major European markets have dipped this morning, as the aftermath of Donald Trump’s press conference ripples through trading floors.
President Trump’s press conference yesterday was a return to the policies and performance aesthetics of his candidacy. Accusations and grandstanding apart, the performance offered us little substance on any economic matters more than he has already told us.
If candidate Trump returns to the podium continually while a Congress works to enact tax reform then the relationship between the two are all important. He needs Congress to build stuff but he does not need them to start tearing things down.
“Trump’s erratic performance in the press conference has had a destabilising influence on investor confidence.”
Trump summarized: This job is hard and people are being mean, especially in the media. Also I won the election.
8.37am GMT
It’s been another bad day for Japanese conglomerate Toshiba, as the crisis at its nuclear division rumbles on.
8.18am GMT
A quiet start to trading in London has seen the FTSE 100 dip by just 7 points, to 7270.
Traders have noted that the S&P 500 and the Nasdaq both fell last night, although the Dow did hit a record high for the sixth day running.
US equities closed lower last night after their massive rally and the stocks over in Asia traded mostly in the lower territory as well. Investors are confident about the economic health of the biggest economy in the world, the US, and are optimistic that upcoming fiscal and tax plans are going to have a more positive impact on the economy.
Having said that, many do believe that the market is getting ahead of itself and there is just too much optimism about how far Mr Trump can go with his fiscal and tax plans as he still needs full approval from congress. The chances of that are not that great and this is what makes some investors a little pessimistic. Mr Trump applauded himself in a tweet yesterday by mentioning that the run in the stock market was mainly due to investor confidence which comes on the back of his upcoming tax plan. Of course, the question is how long can you chew on this, and if your words are not backed up with action, you run a massive risk of disappointment.
7.44am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Has the rally fizzled out? After hitting record highs on Thursday, the world’s stock markets are looking edgier today.
Related: 'Fine-tuned machine': Trump gives extraordinary press conference
- Asia stocks fall
- Treasuries drop
- Dollar steady
- U.S. rate talk
- Oil above $53https://t.co/11Wx3Uvflz pic.twitter.com/tBXxfw7g5c
Our European opening calls:$FTSE 7278 down 0
$DAX 11760 up 2
$CAC 4897 down 2$IBEX 9565 up 10$MIB 19108 up 20
If consumers are having to pay increased prices, volume growth will be harder to come by than when there was deflation in the sector. Volume growth has already slipped from over 7% y/y in October to 4.3% y/y in December, with the consensus estimate for January data today looking for a dip below 4% y/y.
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