US food giant, Kraft Heinz has abandoned its bid to acquire Anglo–Dutch rival, Unilever.
Kraft Pulls out of $143 Billion Bid for Unilever in Early Opposition
Unilever rejected Kraft Heinz’s bid saying it did not see any benefits–financial or strategic in what Kraft was offering with its $143bn bid.
In a joint statement, the two food giants said, “Unilever and Kraft Heinz respect each other.”
Following the news, Unilever shares, which ended the trading week on Friday 13% higher, fell by more than 8% in the early hours of trading in London on Monday to trade at £34.76.
In a statement, Unilever said what Kraft was offering was 18% premium to Unilever's closing share price last Thursday.
On Friday, Kraft shares climbed 11% in New York.
George Salmon, an analyst at Hargreaves Landsdown said that it was indeed very surprising that Kraft pulled out just a day after the deal was announced.
He noted, “It was always going to be difficult to convince shareholders to soften their grip over Unilever given that the company is expected to continue recording substantial growth going forward.”
If the deal were successful, it would have been among the largest in corporate history, as it would have brought together numerous household names in the consumer products category.
Kraft is the owner of Heinz baked beans, ketchup and Philadelphia cheese while Unilever owns Dove soap, Ben and Jerry’s ice cream and Hellmann’s mayonnaise.
Underestimated inherent value
Martin Deboo, an analyst at Jefferies said, “It would seem as though Kraft Heinz have overlooked the difficulties in acquiring a Dutch company with adamant stakeholders and the inherent value of Unilever.”
Over half of Kraft Heinz’s shares are in Unilever, which is listed on the Dutch stock exchange.
According to Kraft spokesperson, his company’s interests were publicized too early into the negotiations.
He said, “Our intention was to proceed on a friendly basis, but Unilever made it clear that it was not interested in the transaction.”
He continued, “It is best to pull out early to allow both companies to pursue their own independent plan to generate value.”
The Financial Times had reported that British Prime Minister Theresa May had requested those concerned to evaluate the deal.
In 2010, Kraft took over Cadbury but this deal was highly controversial, prompting Britain to change the rules on foreign acquisitions of UK companies.
Earlier, Kraft said the Somerdale factory near Bristol would remain open but later said it would close it.
Upon coming to power in July last year, Ms. May said she would revamp the rules in order to block takeovers.
In October, Unilever was met with harsh criticism in the UK and especially by Tesco, after the food giant tried to raise prices in line with the declining value of the pound.
The deal between Kraft Heinz and Unilever would have been the second biggest in history after Mannesmann’s takeover by Vodafone in 2000 for $183bn.