By Anne Steele and Saabira Chaudhuri
Kraft Heinz Co. has made a $143 billion approach to take over U.K. consumer-products giant Unilever PLC, a move that would bring together some of the best-known household brands in the world.
Kraft Heinz said Unilever has declined the proposal, but that "we look forward to working to reach agreement on the terms of a transaction."
The U.S.-based food and beverage maker said it is uncertain that any further formal proposal will be made to Unilever. It also said the terms of any such transaction are uncertain.
In a statement Friday, Unilever said the proposal was for $50 a share, in a mix of $30.23 in cash payable in U.S. dollars and 0.222 share of the combined new company. It said that offer valued Unilever at about $143 billion.
Unilever said Kraft Heinz's proposal represents a premium of 18% to its Thursday closing price, and that it fundamentally undervalues the firm. "Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever's shareholders," said the company. "Unilever does not see the basis for any further discussions."
At $143 billion, Kraft Heinz's offer to buy Unilever would be the second-largest deal across country lines on record, behind Vodafone's $172 billion acquisition of Mannesmann in 1999, according to Dealogic.
A Kraft Heinz spokesman said the company would be triple-headquartered in the U.S., U.K. and Netherlands, but that it would be officially domiciled in the U.S. "This is not an inversion," he said.
Shares of Unilever rose 12.2% in London trading, giving the company a global market value of GBP111.9 billion ($139 billion) according to FactSet. Shares of Kraft Heinz rose 7.3% to $93.61 in New York trading; at that level, it has a market value of about $114 billion.
According to British takeover rules, Kraft has until March 17 to announce a firm intention to make a specific offer, or walk away. Apart from persuading management and antitrust regulators around the world on the merits of a sale, the U.K. and Dutch governments will also likely weigh in. The offer comes ahead of an election in the Netherlands, where Unilever has deep roots. Neither government had publicly responded Friday on the news.
A deal would mark the latest wave of consolidation among consumer-goods giants after Heinz in 2015 merged with Kraft in a deal orchestrated by Warren Buffett and Brazilian private-equity firm 3G Capital Partners L.P., creating one of the world's largest food-and-beverage companies. 3G, an acquisitive Brazilian firm, is known for buying consumer companies it considers bloated and aggressively slashing costs.
A union would bring together brands like Kraft Heinz's namesakes, Oscar Mayer hot dogs, Planters peanuts, Philadelphia cream cheese and Maxwell House coffee with Unilever's Hellmann's mayonnaise, Lipton teas and Ben & Jerry's ice cream. But Kraft Heinz would also be pushing into uncharted territory, acquiring a long list of personal-care and home-care brands like Dove soaps, Axe deodorant and Surf laundry detergent, which make up the bulk of Unilever's portfolio. Unilever has increasingly been pushing into higher-end personal care, making a series of acquisitions like its 2016 deal to buy Dollar Shave club for $1 billion.
Euromonitor food analyst Raphael Moreau suggested Kraft Heinz's approach, even if unsuccessful, could prompt Unilever to sell some food brands to the U.S. company. He noted that gaining approval to combine blockbuster condiments brands could be tough, and that Kraft Heinz may have to settle for a smaller deal.
Consumer-goods firms are struggling with a host of headwinds they have little control over: fluctuating exchange rates, rising commodity prices that often feed into packaging or ingredient costs and tepid global economic growth that has weighed on sales. All that has sharpened the focus on the few things executives can still influence, such as costs and nimbleness in meeting fast-changing consumer tastes.
Several U.S. food makers on Friday delivered a blow to their investors: more disappointing sales trends. General Mills Inc. lowered its forecast for sales and profit its fiscal year; Campbell Soup Co. reported disappointing sales for the latest quarter, and J.M. Smucker Co. said it continues to feel the impact of changing consumer tastes, causing it to lower its sales expectations for the year.
Since its legacy companies merged in 2015, Kraft Heinz has taken an aggressive stance on costs, driven by 3G, which alongside Berkshire Hathaway controls a majority of the company. This month the company announced plans to squeeze out even more savings than it initially targeted when Kraft and Heinz combined. 3G has a reputation for swift layoffs and scrutinizing even the most minor costs using a zero-base budgeting philosophy that calls for departments to justify every expense anew each year.
Kraft Heinz Chief Executive Bernardo Hees joined Heinz when 3G and Berkshire bought it out in 2013. Also a partner at 3G, he joined from Burger King Worldwide Inc., which he reshaped through aggressive cost-cutting and a down-to-business management style.
Still, Kraft Heinz has struggled with sales declines in the U.S. and Europe, where consumers are buying food they view as fresher and more natural. The company has responded by removing artificial colors from foods like Kraft's famous blue-box mac-and-cheese, and creating a new brand of frozen meals aimed at using trendier ingredients to attract younger consumers.
At Unilever, the world's second-largest consumer-goods firm by sales after Procter & Gamble Co., sales growth slowed last year, spooking investors and underscoring cost-cutting pressure. The company, led by longtime Chief Executive Paul Polman, has struggled to grow product volumes relying on price rises to boost sales. Unilever, which makes most of its sales from emerging markets, has also been hit by currency fluctuations, rising commodity prices and tough conditions in major markets like Brazil and India.
Analysts say Unilever's Mr. Polman -- who spent 26 years at Procter & Gamble as well as a short stint at Nestlé as head of its Americas division -- has transformed Unilever as a company. When he became CEO -- the first external head in the company's history -- in January 2009, he inherited a sprawling organization that was in the midst of a turnaround.
Since Mr. Polman became CEO in 2009, Unilever stock has more than doubled. The Dutchman has pushed Unilever toward becoming a higher-margin home and personal care company and away from being a foods company through a series of acquisitions and divestitures. Mr. Polman recently started Unilever on a cost-cutting campaign, including zero-base budgeting.
The savings are funding an organizational reshuffle at the company aimed at boosting sales that Chief Financial Officer Graeme Pitkethly recently described as "the biggest change Unilever has undergone in the last 10 years." It is restructuring its workforce to direct more resources to local markets, and giving product-category-focused teams there more autonomy.
Unilever's structure could make a potential deal more complex. It technically has headquarters in both the U.K. and the Netherlands, though Mr. Polman works from the company's headquarters in London.
Annie Gasparro contributed to this article
Write to Anne Steele at Anne.Steele@wsj.com and Saabira Chaudhuri at email@example.com