The Kraft Heinz Company Statement Regarding Unilever plc

[77ss]

This is the most excitement that my HYP has seen since International Power got taken out in 2009 (was it?).

Miner

You've obviously been buying the wrong shares !

Or the right ones, if your objective is to avoid excitement.

[JohnnyCyclops]

Inaccurate.

This.

[Breelander]

The interesting aspect of this particular news (from a HYP Practical perspective), is how many seasoned HYPers will actually sell on this news.

... if HYP1 is anything to go by - its takeover victims to date are:

2001: Blue Circle
2002-2005: none
2006: Associated British Ports
2007: Gallaher, Alliance Boots (*)
2008: Resolution (*), Scottish & Newcastle, Alliance & Leicester
2009-2016: none

As a 'seasoned' (ancient?) HYPer I held both Boots and Scottish & Newcastle in my HYP. In both cases I waited and took the takeover cash. In hindsight that was the correct decision. At no time between the talks becoming public knowledge and the takeover becoming final could a better price be found in the market.

Both Boots an S&N were examples of a good company being coveted by the purchaser, as would seem to be the case here. As I hold Unilever I will wait and see what form the deal may take. An all cash offer would make me hold until completion, a share swap (particularly if it ended up as US-listed Kraft shares) would make me take pre-emptive action - as I did for my Alliance & Leicester holding.

[77ss]

Inaccurate.

This.

Your graph proves my point:

to the mid/high £40s range... and never came back down again.


is inaccurate - or to be blunt, just plain wrong.

[JohnnyCyclops]

is inaccurate - or to be blunt, just plain wrong.

"The AZN stock had broadly stayed around the £30 mark from 2010 to 2013. In 2014 it started to move upwards, and in the spring of that year leapt above £40 for the first time in the decade. Since then it's mostly been in the £40s, with a couple of jumps into the £50s and a couple of bumps into the £30s. Overall, the rejected bid by Pfizer does appear to have had the effect of the market re-rating the stock's valuation up from the first few years of the current decade."

[77ss]

is inaccurate - or to be blunt, just plain wrong.

"The AZN stock had broadly stayed around the £30 mark from 2010 to 2013. In 2014 it started to move upwards, and in the spring of that year leapt above £40 for the first time in the decade. Since then it's mostly been in the £40s, with a couple of jumps into the £50s and a couple of bumps into the £30s. Overall, the rejected bid by Pfizer does appear to have had the effect of the market re-rating the stock's valuation up from the first few years of the current decade."

Agreed. I don't dispute that you have a point. I just took issue with your over-egging the cake.

[77ss]

To answer miner, I at least would not dream of selling on the news. A one off capital gain is fine but I prefer a dependable well run company that will pay dividends more or less indefinitely.

Dod

Quite.

I also look back at the Kraft takeover of Cadbury. The initial offer was £9.8bn - later increased to £11.5bn.

If the initial offer for Unilever, worth $50/share, is increased by a similar proportion, we are looking at about $59/share, or £47.

Much too early to even contemplate selling, in my view, even if one wanted to.

[tjh290633]

I have two points to make about this.

First, if the sudden price rise makes the share very overweight, then take some off the table and let the rest run for now. If the approach is unsuccessful, then the price may fall back to the earlier level. Back in the early days of the 21st century, Blue Circle had two approaches, the first being unsuccessful. Then came another approach, successful this time in 2001, when Laporte won the day. I regretted no having taken some profit while the first offer was on the table.

Second, if the terms continue to involve stock of Kraft-Heinz, then I would sell in the market to avoid having the US stock, even if they get a UK quotation.

Having said all that, ULVR is still below my median weight, so I am not tempted to take action. The yield is still well above my exiting point, at 2.9%.

Time for masterly inaction, I feel.

TJH

[toofast2live]

It's this darned Brexit devaluation against the dollar. It's making all our companies juicy targets at low $ prices.

Fancy a utility or two, or maybe VOD - all at a 20% discount to 8 months ago.

[Lootman]

I read somewhere of a corporate tax strategy that allows profits to be routed via a Dutch company to a tax haven like the Cayman Islands - A Dutch Sandwich was the term.

https://en.wikipedia.org/wiki/Dutch_Sandwich

it's interesting to see the lengths companies will go to save a few hundred million in tax (!) and I'm definitely not saying that this is what Kraft are doing!

Conversely, such responses might be seen as an entirely rational response to highly irrational tax policies(*). In the end, different nations are competing for capital, and capital will tend to gravitate towards the locations and jurisdictions that are the most competitive in terms of taxes, regulations, privacy and so on.

And it's a game that the UK plays better than most, and perhaps even more so if we become an offshore tax haven after Brexit.

(*) Credit here where it's due. In his book "The Divided Self", controversial Scottish psychiatrist R. D. Laing developed the idea that insanity may be a perfectly rational and sane reaction to an insane world, paraphrasing brutally there.

[melonfool]

I'd quite like this not to happen.

Thank you



Mel

[YeeWo]

Unilever is 8% of my pot. I first bought on the 12th Jan 2011 and have done a little bit of tinkering, 12.79% XIRR since 2011.
I agree with Melonfool, I really don't want this to happen. Over the years I've seen ULVR products all over the world, visited Port Sunlight and generally revelled in the position that The Business has in some of the most promising Global Growth Markets. We, the British, should be really Proud of Unilever, it'll be a really Sad Day if it becomes an LBO victim. I imagine, literally, thousands of families Globally are Sh**ing themselves tonight.
"Uncle" Warren should leave this well alone........What's the point of destroying Societies that your "foundation" has to subsequently help?
Is Greed really That GOOD?

[Dod1010]

YeeWo

You are exactly correct. We need to support the likes of Unilever. It is a great investment proposition and as much as any international company is a great contributor to our fiscal set up. not sure that would continue in US ownership.

Of course it is raw capitalism.

Dod

[miner1000]

I agree with most on this thread and will not be selling Unilever. Great to see the folks defending ULVR. A few weeks ago it was never going to be added to by most as the yield was too low. Now, with the value up 10% we are all fighting to hold on and hoping Kraft will go away. Funny bunch we HYPers.

Cheers, Miner

[JohnnyCyclops]

Before we get all dewey-eyed, many British people will be squeezing out the Heinz Ketchup on their breakfasts this morning, possibly with a side helping of Heinz Baked Beans. And many will believe they are vested in British tradition, and prepared to pay a premium for a brand they trust and enjoy.

The Heinz 57 plant at Wigan is massive. I think it's the same company as Kraft Heinz.

http://www.heinz.co.uk/our-company/abou ... nd-ireland

Unilever, like KH, has grown through M&A. It's now time to see if this deal makes good business sense, including for brands management.

[Arborbridge]

Unilever, like KH, has grown through M&A.

No doubt, but the flavour of the financial comments in the newspapers is that KH is far more into short-termism, sweating the assets and eliminating waste fot short term gain. In other words, a typical private equity approach, they say. Compared with this, Unliver is in it for long term shareholder gain, re-investment in research and development.
The two models are at the opposite end of the spectrum of business conduct, and I know which any HYPer would prefer!

Loading up a company with debt in order that another company's director might profit seems a particularly perverse practice.

On the more emotional side, I do not approve of selling out of one of the only truly internationally known mega scale UK companies. Losing Cadbury's was quite bad enough.


Arb.

[Arborbridge]

And many will believe they are vested in British tradition,

The number of people who (if they think of anything at all) who believe they are vested in a British tradition must be small. Can there be any significant number of people believing Heinz is British? I doubt it.


Arb.

[ADrunkenMarcus]

I'll vote no to any takeover of Unilever! Not that my vote is likely to tip it

A cross-post. There was an excellent article on 'Seeking Alpha' which I agree with entirely:
viewtopic.php?f=33&p=32550#p32538

From October 1996 to October 2016, Unilever went up 10.7-fold vs. 3.3-fold for the MSCI World Index Total Return. It compounded at 12.6 percent vs 6.2 percent for the index, and multiple expansion only contributed 1.3 percent a year: leaving 11.3 percent CAGR from the business's performance. I look forward to more of the same.

Best wishes


Mark.

[baldchap]

The price rise took my ULVR holding up to 7.5%, so unless it reverts to £35 next week I will be selling some and rebalancing.
I would happily top up again should it ever go below £35 in the future.

For what it is worth, in my opinion, a takeover/merger will never happen.
After Cadbury, Kraft are not a particularly well respected company in the UK. Of course money talks, so I may be wrong....again

[Lootman]

On the more emotional side, I do not approve of selling out of one of the only truly internationally known mega scale UK companies. Losing Cadbury's was quite bad enough.

There may become a point where there quite simply is not a major consumer goods UK share that one can buy. Absent Unilever, the only other consumer share I have held is Reckitt Benckiser and that gets mentioned as a takeover target as well. It's one of those sectors that attracts a lot of corporate activity because they typically generate a lot of cash, and where a global scale is important because they are essentially the same products sold everywhere.

Diageo is another world-class UK brands company that could get swallowed up in the future. And of course there are other sectors where the UK no longer has much large-scale representation any more, like autos and chemicals. At some point UK investors may have to accept that to be truly diversified, they need to hold foreign shares as well, at least to plugs the gaps in an increasingly specialised UK market.

If Unilever goes, there isn't a close replacement, because it is a leader in both foods and household goods. There is Proctor and Gamble which is more household goods, and Nestle which is more foods, as is Kraft of course. But I'm already struggling to come up with other shares in that sector of that size, and the other ones tend to be smaller and more specialised e.g. Colgate Palmolive, General Mills, Kimberly Clark.

If you'd asked me a month ago, I'd have said that Unilever is too large and richly valued to be taken over. Guess I'm wrong again.