US-based Kraft Heinz announced on Friday a proposed USD 143 billion merger with Unilever in what would be one of the biggest deals ever.
But the Anglo-Dutch consumer goods giant has declined, saying in a statement the offer fundamentally undervalues" the company.
"Unilever rejected the proposal as it sees no merit, either financial or strategic, for Unilever's shareholders. Unilever does not see the basis for any further discussions," the statement also read.
Nevertheless, Unilever shares were soared as much as 10 percent in premarket trading Thursday.
"While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction," Kraft said in a statement. "[But] there can be no certainty that any further formal proposal will be made to the Board of Unilever or that an offer will be made at all."
Kraft is backed by private equity firm 3G Capital and Warren Buffett.
A deal with Unilever would add Hellmann's mayonnaise, Ben & Jerry's ice cream, and Knorr soups to a portfolio that includes Heinz ketchup and Kraft Macaroni and Cheese.
Consumer Edge Research's Jonathan Feeney said that Kraft's posturing is a traditional response to initial merger disagreements.
"It certainly sounds like a typical opening salvo of a merger approach," the consumer staples analyst told CNBC's "Squawk Box" on Friday. "It's hard to tell at this point what's actually friendly and unfriendly. Often times it's standard procedure."
But the deal would undoubtedly be a key strategic play for Kraft Heinz because it would broaden the company's international scope, he said.
"What this does is a lot more than just margin opportunity," he said. "You get Kraft Heinz into long-term growth opportunities structurally in developing markets that are very, very attractive."
"The real structural growth opportunity is building those adoption rates of high-margin products all around the world," he continued. "I think that's what this transaction signals."
Kraft Heinz has been expected to do a deal this year, given earlier reports that 3G's Brazilian principals were raising a new fund.