CONSUMER goods giant Unilever has rebuffed a proposed £115 billion mega-merger with global food firm Kraft Heinz.

The company behind Heinz Tomato Ketchup and Philadelphia cheese said it had made a "comprehensive proposal" about combining the two companies, but Unilever turned the offer down.

In an announcement, Kraft Heinz said: "While Unilever has declined the proposal, we look forward to working to reach agreement on the terms of a transaction.

"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 or as to the terms of any transaction."

Unilever, which owns Dove, Ben & Jerry's ice cream and Domestos, saw its share price rocket 12 per cent in London on news of the approach.

The Anglo-Dutch firm said the offer represented a premium of 18 per cent of its closing share price on February 16, valuing the company at $143bn (£115bn).

Steve Clayton, fund manager at Hargreaves Lansdown, said such a move would create enormous cost savings.

"Putting portfolios of brands together can create huge synergies across marketing, manufacturing and distribution, even before you think about cutting the combined HQ back to size.

"Kraft Heinz are attempting a massive push on the fast forward button, for to acquire the sheer scale of brands that Unilever represents through one-off acquisitions could take decades. With debt cheap and abundant right now, Kraft have spotted their opportunity."

If a deal was thrashed out between the two companies it would be one of the biggest takeovers of a British firm in corporate history.

Unilever said the move "fundamentally undervalues" the company and saw "no merit, either financial or strategic" for its shareholders.

"Unilever does not see the basis for any further discussions," it added.

The proposed tie-up comes amid a gloomy outlook for shoppers as the Brexit-hit pound begins to push up the cost of products on supermarket shelves.

Inflation reached a two-and-a-half-year high in January at 1.8 per cent after more expensive food and fuel bumped up the overall cost of living.

Unilever chief executive Paul Polman said in January that Britain should "get used to" price rises following sterling's Brexit-induced collapse.

His comments came just months after the company was locked in a stand-off with Tesco over a 10 per cent price hike, leaving Britain's largest supermarket grappling with a shortage of store cupboard staples - including Marmite, Pot Noodle and Persil - before the dispute was resolved.

Unilever announced last month that annual pre-tax profit rose to $7.47bn (£6.3bn) from $7.2 bn(£6.1bn) last year, but revenues dropped one per cent to $52.7bn (£44.7bn), while underlying sales rose by a lower-than-expected 3.7 per cent.

US-listed shares in Kraft-Heinz were up 4.8 per cent in pre-market trading at $91.50 (£73.64).

Kraft Foods became the subject of $45bn takeover in 2015 by HJ Heinz Co, owned by US business magnate Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital.