"What you're going to have is not only the bid premium falling but multiple compression on a standalone basis because at the same time what you have is too many aggressive estimates following the share price," explained Lacalle. He rejected the view that cheap funding, which has been a key propeller of acquisition activity in recent years, was on the verge of drying up.
"Even though interest rates might be going up a little bit, they're still extremely low and if the numbers make sense for an acquisition, you can still understand the kind of leverage in the deal considering the synergies," contended the CIO.
The Citi research team also cast its net wider to consider the implications for regional Unilever's peers, should the American behemoth remain on the prowl on the continent.
"Kraft's intentions, and it may not be in our space, we do sense that the fact that it was ready to offer $143 billion for a company which it may have seen as offering untapped opportunity, despite having more than half of its revenue base outside its area of expertise and footprint, suggests that all European Food & HPC (home and personal care) players with a margin below 20 percent, and a market cap below $140 billion with no controlling shareholder, could feel the urgency to work on their portfolio and/or cost structure to avoid an unsolicited offer," read the Citi note.
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