$20.3 billion deal would create world's largest food company

NEW YORK - Unilever is buying Bestfoods for $20.3 billion in a deal that would create the world's biggest food company and put some of America's best known brand-name products - including Lipton tea and Skippy peanut butter - in the same corporate cupboard.

The companies' combined revenue in 1999 of about $52 billion easily surpasses that of Nestle, which had $46 billion in sales last year.

Unilever, an Anglo-Dutch conglomerate, owns Lipton tea, Ragu spaghetti sauce, Vaseline and Pepsodent toothpaste, and recently bought Ben & Jerry's ice cream business. Bestfood's brands include Skippy, Hellman's mayonnaise and Thomas' English muffins.

The deal, announced Tuesday, is subject to regulatory approval in both Europe and the United States. It is expected to be completed by the end of the year.

A month ago, Bestfoods spurned Unilever's initial offer, saying that the bid was too low and that it preferred to remain independent. But Unilever persisted. The final offer was $73, up from the original bid of $66.

Unilever will assume about $4 billion in debt. The companies estimate their combination will lead to savings of up to $750 million annually.

The deal is expected to spur other partnerships in the long-dormant food product business.

That's because the huge multinational companies that are looking to expand their markets know they will need to add strong brand names like those owned by companies such as Bestfoods, Heinz and Campbell Soup.

Food companies are also feeling pressure to merge because supermarket chains are combining and getting larger. Food companies realize they need to get bigger to negotiate prices and the placement of their products.

Shares of the Englewood, N.J.-based Bestfoods surged nearly 10 percent Tuesday on the New York Stock Exchange, up $6.188 to $69.188. Shares of Anglo-Dutch conglomerate Unilever rose 87.5 cents to $51.25, also on the NYSE.

After rejecting Unilever's original offer, Bestfoods was widely rumored to be in negotiations to sell all or part of its operations to Diageo PLC, which owns of Pillsbury baking products. Then reports surfaced over the weekend that Bestfoods was close to acquiring long-ailing Campbell Soup for $15 billion.

Observers said Bestfoods was probably using the speculation to extract a higher offer from Unilever.

Wall Street analysts praised Bestfoods' deft handling of the negotiations to achieve a higher price for their shareholders.

''It was somewhat high-stakes poker, but in the end it worked,'' said Mitchell Pinheiro at Philadelphia-based Janney Montgomery Scott.

On the Net:

http://www.bestfoods.com

http://www.unilever.com