Bestfoods of the US and British-based food and drinks group Diageo are in talks about merging their bakery operations. The move is seen as a defensive tactic by Bestfoods to fend-off the unsolicited $18.4bn takeover bid by Unilever.

Guinness-to-Burger King conglomerate Diageo has been examining options for its US packaged foods business which is best known for its Pillsbury dough products. A partial merger with Bestfoods, the largest fresh premium baker in the US, would give Pillsbury powerful US brands including Entenmann's cakes, Thomas' English muffins, and Friehofer's breads.

Informed onlookers believe that whatever the outcome of the Bestfoods/Unilever battle, Pillsbury could still be in the running to acquire Bestfoods' baking assets as the Anglo-Dutch group is believed to be uninterested in the bakery business.

Bestfoods has rejected Unilever's approach as "financially inadequate". Neither party – nor Diageo – was willing to comment yesterday.

News source: Financial Times