Heinz battles Unilever for food giant

LONDON - A pitched battle for the American food company Bestfoods looms with reports that HJ Heinz is seeking to counter Unilever's $US18.4 billion ($37.5 billion) allcash offer.

USA Today reported that Heinz was energetically seeking to woo Bestfoods into a "merger of equals."

This would pit two giants of the sector against each other: Niall FitzGerald, cochairman of AngloDutch Unilever, and Dr Tony O'Reilly, chairman of Pittsburgh-based Heinz. Dr O'Reilly is also chairman of Independent News & Media, which owns Wilson and Horton, publishers of the Herald.

Unilever is widely believed to have flirted with the idea of a bid for Heinz on several occasions.

USA Today said that Dr O'Reilly was in New York trying to convince Bestfoods chief executive Dick Shoemate that the deal with Heinz made better sense. He is believed to have offered $US72 a share compared with $US66 for the Unilever bid.

Dr O'Reilly was also there to be honoured at an America Ireland Fund dinner. He is due to retire as chairman of Heinz at the annual meeting in September.

A spokesman for Unilever said: "We haven't ruled out being in a bid battle. But we believe the price we have offered is full and fair. We'd still like to talk to the Bestfoods board."

Mr FitzGerald said last week that the group could raise its offer or go hostile to seal the takeover.

Bestfoods has operations in 60 countries and strong brands: Knorr soups, Mazola cooking oils and Hellmann's mayonnaise.

One analyst said it was a "good fit" with Unilever in strategic terms, but even before the Heinz bid emerged there had been doubts about the price.

"It's very expensive," said the New York-based analyst.

Other analysts said that although the Bestfoods board was likely to favour a merger of equals with Heinz, the US group's shareholders might be more inclined to accept a hostile cash offer from Unilever.

One said: "If Bestfoods agrees to a tie-up with Heinz, which would almost certainly be financed with a large proportion of equity, it would destroy management credibility.

"That would make it easy for Unilever to go hostile and take Bestfoods out at not much more than the $US66 it is offering," the analyst added.

Unilever recently picked up the US diet food company Slimfast and the premium icecream manufacturer Ben and Jerry's, two of the strongest brand names in their sectors.

The aggressive strategy is in contrast to the company's decision to return 5 billion pounds sterling to shareholders a year ago when it considered the price of targets to be too high.

Several Bestfoods shareholders have filed lawsuits alleging that the rejection by directors of Unilever's approach last Tuesday would deprive investors of the premium Unilever, or another potential bidder, could be prepared to pay.

- INDEPENDENT