Kraft Heinz withdraws takeover bid for Unilever
ON FRIDAY, Kraft Heinz seemed determined to press ahead with a $143 billion takeover bid for Unilever, an ambitious campaign that would have put doz- ens of the best-known names in consumer households around the world under one roof.
But less than 48 hours later, Kraft’s board – including Warren Buffett and Brazilian-born billionaire Jorge Paulo Lemann – decided to walk away.
The alternative would have been to pursue a public and possibly costly fight against Unilever, a bulwark of British and Dutch business.
Instead, the two consumer goods giants said on Sunday that Kraft had withdrawn its takeover bid after an agreement on friendly terms. As a joint statement from the companies put it: “Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever.”
The announcement swiftly ended what was poised to become the biggest instance of consolidation within the food and consumer goods industry, at a time when giants in the fields have been looking to combine to command more grocery shelf space. A combination of Kraft Heinz, itself the product of a mega-merger, and Unilever would have sold everything from ketchup and hot dogs to mayonnaise and soap.
Kraft surprised the world when it disclosed on Friday, at the behest of the British merger regulator, that it had made a bid for Unilever. The disclosure came after a report in a Financial Times’ blog said the two firms had held talks. Unilever responded by saying that the $143 billion offer, a roughly 18 percent premium on the company’s closing stock price on Thursday, was too low and that it saw no reason to engage in talks.
Kraft had approached Unilever only a few weeks before and had hoped to court its target in private, according to people with knowledge of the talks.
Much of the food world had prepared for a potentially aggressive campaign by Kraft, whose backers at the Brazilian investment firm 3G Capital have long been known as swashbuckling deal-makers eager to build up titan. Along with Buffett, 3G had engineered a takeover of Heinz in 2013 and then Heinz’s merger with Kraft two years later, each in a multibillion-dollar deal.
By late last year, analysts and investors were speculating that Kraft was on the hunt for yet another acquisition, although talk at the time centred on companies like Mondelez International, the former candy business of Kraft. Unilever, with its mix of food and household goods, had not been on many radar screens, although they said its profile and its strength in emerging markets would have complemented Kraft’s heavy focus on the US.
Shares of Kraft Heinz jumped more than 10 percent on Friday while those of Unilever rose 15 percent, suggesting investors in both were eager for a union.
While many on Wall Street had assumed that Kraft and 3G were prepared to fight for Unilever, Kraft and its backers had little desire to wage such a battle. That stands in contrast with how InBev, the 3G-backed beer company, pursued Anheuser Busch in 2008: InBev was prepared to oust Anheuser’s board before agreeing to raise its offer and reach a friendly deal.
Discussions among senior executives at Kraft Heinz and Unilever, as well as their advisers, underscored that Unilever was unwilling to proceed at any price. Moreover, the British government had expressed concern about the potential acquisition, citing the treatment of another British icon, Cadbury, after its takeover by Kraft in 2010, including accusations that Kraft reneged on promises to maintain hundreds of British jobs after the deal closed.