The Kraft Heinz Company Statement Regarding Unilever plc

[ADrunkenMarcus]

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.

I hope you'll be proved right!

Best wishes


Mark.

[Bouleversee]

I'd prefer it wasn't take over, too, in spite of the fact that the value of my holding (bought Dec. 2010) has almost doubled. Too hard to find similar replacements and also, according to sod's law and like most of my major gains, it's not in an ISA whereas the shares bought with my ISA subs. for the past few years are showing an overall loss of over 18%. In answer to Arb's query about these, they include Interserve (which I made the mistake of topping up after the initial fall, only to see it go further down), Cobham, Carillion, Centrica, most of the leading miners, ditto supermarkets, Next and N. Brown, Marston's (since it was transferred into the ISA). The only profitable ones were Sky (what's happening about that takeover?), Dairy Crest, Photo-Me, Horizon Discovery Group. RDSB breaking even. ISG taken over at a loss. There were some takeover gains but not HYP shares. I'm waiting till April 5 to work out what the overall position is over all my portfolios which I intend to dispose of to a large extent as I can't be bothered with it all and would like to have time for other things and need to do some spending.

[OLTB]

The only profitable ones were Sky (what's happening about that takeover?),

Funny, I was wondering about that recently and read this on a feed:

'Some US hedge funds have built large positions in Sky ahead of its proposed takeover by Rupert Murdoch's 21st Century Fox. Funds managed by HBK and Pentwater Capital took the positions as Sky shares sank below the 1,075p offer price due to concerns the deal may be affected by regulators.'

Cheers, OLTB.

[ADrunkenMarcus]

I'd prefer it wasn't take over, too, in spite of the fact that the value of my holding (bought Dec. 2010) has almost doubled. Too hard to find similar replacements...

I fully agree with you about the problem in finding a similar replacement, or even a replacement that is up to the same standard of quality. Unilever, for me, is in an ISA so I do not have to worry about tax issues. An issue for many people will be that they may not want to hold foreign shares or have the ability to do so. Personally, I wouldn't find it a problem at all and would happily chose from American, Canadian or European shares in finding a replacement. However, if it did get taken over (merged is perhaps a better phrasing) then there'd be a decision for me as to whether to hold the 'Kraft Heinz Unilever' shares (I'd look at the numbers but I'd have preferred Unilever on its own) received and then what to do in reinvesting the cash component.

Even at 4100p, Unilever has an estimated forward dividend yield of 3 percent: 5000p gives a yield of 2.5 percent. I would not sell at those prices absent being forced to, although others might chose to take the proceeds and then reinvest in a higher yielder to boost their income. Whether that income would have the same security or growth prospects as Unilever's dividends, I doubt.

Best wishes


Mark.

[77ss]

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.

Unwise, in my view, to sell now. Uncomfortable though it may be.

Indeed, I am seriously considering adding next week. Taking a punt, if you like, on the initial offer of $50/share just being a starting point. Over £42 per share, and I may reconsider.

Greedy perhaps, but in the long run, I don't think being overweight in ULVR will do me me any harm, even if the Kraft approach collapses.

[monabri]

Interesting article in the DT regarding UVLR and Dutch law

http://www.telegraph.co.uk/business/201 ... aft-heinz/

It looks it is going to be difficult for a takeover. There is also a reference to Mrs May and her view of the Cadbury takeover

[TUK020]

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!


Arb.

Interesting statement. You could say that HYP looks for companies that pay a healthy dividend, i.e. sweat the assets, and prioritise returning cash to shareholders over reinvestment in management pet projects with uncertain returns.....

[Dod1010]

You could say that HYP looks for companies that pay a healthy dividend, i.e. sweat the assets, and prioritise returning cash to shareholders over reinvestment in management pet projects with uncertain returns.....

No I think not. What most HYPers are looking for is long term sustainability of the dividend for sure, but also of the business so as to ensure the means are there for the dividend to be sustained and indeed increased over the long term. Stripping out costs and sweating assets is one thing, but it tends to be short termism, and Kraft Heinz remind me of the Barbarians at the Gate scenario of many years back, was it RBR Nabisco? It seems to me that the biggest block to this merger or whatever it is to be called is the gulf separating the two cultures. I daresay the US side is not concerned about that. I hope it will end like Pfizer/AstraZeneca but who knows?

I certainly do not want to end up with Kraft Heinz shares so not sure what I will do if it goes through.

The trouble is these things work both ways. After all our very own BAT is busily buying Reynolds. Not quite the same but Unilever may have been complacent in its attitude, national treasure, too big for an approach etc.

Dod

[Arborbridge]

You could say that HYP looks for companies that pay a healthy dividend, i.e. sweat the assets, and prioritise returning cash to shareholders over reinvestment in management pet projects with uncertain returns.

You've rather loaded that statement to suit your purpose, where italicised

It might be nearer the truth to say that HYP looks for companies which pay a healthy sustainable dividend which is achieved over the long term by healthy stewardship of the business which includes building for the future. Unilever has excelled in doing that: Kraft and Heinz have rather shorter terms aims if the financial press coverage is accurate. Take what you can but not invest in the future.

I must say, one part of me doubts this narrative, because it does not stack up with what we understand of Buffett's ideology, which is all about long-termism - although also with the efficient deployment of capital. However, it could fit with the general aims of private equity, which is the nature of the other company involved. PE tends to go for a relatively quick turnround of capital from one place to another with a handsome exit strategy for those running the PE fund.

Arb.

[Arborbridge]

After all our very own BAT is busily buying Reynolds.

Dod,
BATs is in it for the very long term, which does make it a different case. As you say, not quite the same: well, I'd say radically different!


Arb.

[toofast2live]

Oh, come on! Off with the rose tints. It's different but not radically different. A key pledge from BAT?

...A full buy out could bring about as much as $400m in cost savings

Source: BAT bid document, quoted in the FT. All takeovers are partly or predominantly predicated on cost savings.

I would rather ULVR made the efficiencies themselves, but if they remain a bloated bureaucracy (and that is a charge that has been levelled at them before) compared to the likes of Kraft ( who have not destroyed any of their brands) they will reap the consequences.

[Dod1010]

Quite right Arb. My point did not come across very well. What I was thinking of was of the US buying up iconic UK companies. Not sure if Reynolds is an icon in the US but sometimes (certainly over my lifetime) there has been a feeling that the US is buying all the best in the UK, but of course the UK is a big investor in the US as well. That was really what I was trying to; it is not a one way street.

Dod

[toofast2live]

Dod, they don't come much more iconic than this ( for US smokers):

R. J. Reynolds Tobacco Company brands
Camel.
Capri.
Doral.
Eclipse.
Kent.
Lucky Strike.
More.
Newport.

Camel and Lucky Strike are Global iconic brands.

[OZYU]

The concept of Country means very little to any of these very large internationally operating companies.

Even the title if this thread is mistaken, because the offer is for UNILEVER, the whole thing not just the PLC.

I have already posted that on the whole, despite having an investment interest directly and indirectly, at both ends of this potential corporate action, I would prefer status quo, plus, just like Toofast, for ULVR to strip out the fat themselves, of which there must be plenty. That last bit might stop its base €divi growth from slowing, which it is from about 8% to just under 6% now, and is the only attraction since the actual quantum, ignoring temporary CABLE effects, does not lead to a good/HYP yield.

A major player in this will be WB, and is definitely long term.

Sad as it is to contemplate a good Co. potentially leaving our portfolios, we should not imho fall into the 'little brit' attitude on this, because there is hypocrisy in that, nobody UK centred screamed when AZN was created after all, or when NG. acquired large businesses in the US, or when TSCO was on the rampage in international expansion, or with what BATS is up too, as Dod said. Just plain capitalism at work, now a bit difficult not to believe in the concept and have much of one's non property assets in the markets.

Ozyu

[OZYU]

Erratum

I tried to edit CABLE to fx, but got there too late!

Ozyu

[ADrunkenMarcus]

Maybe some good might come of it?

I hope the merger doesn't happen, but if anything does go ahead then perhaps Kraft Heinz could take Unilever's food business? That's always been the more problematic area of the company and yet it would make a better fit with Kraft Heinz. There has been some speculation that this is what they're really after.

Meanwhile, Unilever are aware that they are not too big for poachers and will need to continue to justify their existence as a standalone company. I hope that leads to a continued focus on the basics and a desire to be as efficient as possible, consistent with operating a long term sustainable business culture. No company is ever operating at its most efficient. There is considerable scope, I am sure, for them to do even better.

Best wishes


Mark.

[Dod1010]

Thanks toofast2live. Not being a smoker and knowing nothing of US brands I did not but that is good.

I said early on in this thread that Unilever has dual nationality and I just wonder if that might have a bearing on the whole situation. The Dutch company and its UK counterpart are so intertwined that they could not take one without the other and the Dutch Government might be less laid back about this than the UK Government, especially as we see the rise of nationalism in their elections. (Heard something about this on the radio but I am sorry I did not pay too much attention.)

According to the 2015 Annual Report, Blackrock and the Leverhulme Trust are the only significant shareholders with just over 6% and just over 5%. They would need to be won over but the Trust has to be bound not by sentiment but by Charity law, so that leaves Blackrock, but I expect nearly every fund manager in our land will have some shares in Unilever PLC. I do not know about NV but they disclose no major shareholder.

This has a long way to go.

Dod

[Arborbridge]

nobody UK centred screamed when AZN was created after all, or when NG. acquired large businesses in the US, or when TSCO was on the rampage in international expansion, or with what BATS is up too, as Dod said.

Of course not - it's perfectly natural to want to defend what you see as being, "your own turf". If you don't care, as sure as eggs no one in the US or Europe will. Our concern must be UK PLC, and if that means taking over foreign companies, or alternatively inhibiting takeovers of subtantially British ones, I'm all for it.

Thanks to some Dutch and European legislation - which is considerably more civilised than ours concerning "stakeholders" interests - this proposed take over may not get such as easy ride.

On a purely practical HYP point, since we largely invest in UK companies, we are right to be concerned if one of them in taken from our HYP-pool.

Arb.

[richfool]

Offer withdrawn, according to Bloomberg.

'The companies hold each other in high regard' say Kraft

Yep, it looks like the offer is being amicably withdrawn:

http://www.bbc.co.uk/news/business-39022692

[DrBunsenHoneydew]

Predict effect on share price tomorrow?