According to a statement released by Kraft Heinz, its initial offer was rejected by Unilever – but it intends to pursue a deal that would be one of the biggest in corporate history.
Following the news, shares in Unilever rose 11%, suggesting traders believe a deal will happen. Unilever's share price of £37.22 gives the company a market valuation of £112bn ($139bn) – meaning a potential acquisition could dwarf AB InBev's £79bn ($98bn) takeover of its rival brewer SABMiller, which was approved last year.
Kraft Heinz, the smaller of the two companies, is worth $106bn (£85.3bn).
The statement from Kraft Heinz read: "Kraft confirms that it has made a comprehensive proposal to Unilever about combining the two groups to create a leading consumer goods company with a mission of long-term growth and sustainable living.
"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."
Kraft Heinz was formed in 2015 in a deal backed by Warren Buffett's investment company Berkshire Hathaway, becoming the world’s fifth-largest food and drink company.
In 2012, Kraft had previously spun off its international and snack businesses into a separate company, Mondelez International leaving the smaller Kraft company to focus on US grocery brands.
Unilever is the world’s third largest FMCG company, after Procter & Gamble and Nestlé.