Kraft Heinz drops Unilever takeover bid

The Malta Business Weekly - - FRONT PAGE -

Kraft Heinz has aban­doned its of­fer to buy Unilever, its An­gloDutch ri­val.

The Mar­mite maker re­jected the US food giant's bid on Fri­day, say­ing it saw "no merit, ei­ther fi­nan­cial or strate­gic" in Kraft's of­fer, worth about $143bn.

"Unilever and Kraft Heinz hold each other in high re­gard," the com­pa­nies said in a joint state­ment.

Shares in Unilever, which closed 13% higher on Fri­day, fell 7.3% in lunchtime trad­ing in Lon­don to £35.18.

Kraft's of­fer had been at an 18% pre­mium to Unilever's clos­ing share price on Thurs­day. Kraft shares rose 11% on Wall Street on Fri­day.

Ge­orge Salmon, a Har­g­reaves Lans­down an­a­lyst, said shelv­ing the deal just one busi­ness day af­ter it was an­nounced came as a sur­prise.

"It was al­ways go­ing to be a dif­fi­cult pitch to con­vince share­hold­ers to re­lin­quish their grip on Unilever, given the ex­pec­ta­tions for the com­pany to keep churn­ing out re­silient growth in the years to come," he said.

The deal would have been one of the big­gest in cor­po­rate his­tory, com­bin­ing dozens of house­hold names.

Unilever owns Ben & Jerry's ice cream, Dove soap, and Hell­mann's may­on­naise, while Kraft's range in­cludes Philadel­phia cheese and Heinz baked beans.

"It would ap­pear that Kraft Heinz have un­der­es­ti­mated both the in­trin­sic value of Unilever and the chal­lenge of ac­quir­ing con­trol of a Dutch com­pany whose stake­hold­ers would have op­posed such a move vo­cif­er­ously," said Martin De­boo, a Jefferies In­ter­na­tional an­a­lyst.

More than half of the com­pany's shares are in the Dutch-listed en­tity, he said.

Michael Mullen, a Kraft Heinz spokesman, said its in­ter­est was made pub­lic at an ex­tremely early stage.

"Our in­ten­tion was to pro­ceed on a friendly ba­sis, but it was made clear Unilever did not wish to pur­sue a trans­ac­tion. It is best to step away early so both com­pa­nies can fo­cus on their own in­de­pen­dent plans to gen­er­ate value," he said.

Re­ports sug­gested that Prime Min­is­ter Theresa May had asked of­fi­cials to ex­am­ine the deal be­fore it was scrapped.

How­ever, her spokesman said on Mon­day that Down­ing Street was not in­volved in Kraft's de­ci­sion to with­draw the of­fer.

The takeover of Cad­bury by Kraft in 2010 was con­tro­ver­sial enough to prompt a re­vamp of the rules gov­ern­ing how for­eign firms buy UK com­pa­nies.

Just a week af­ter promis­ing to keep open Cad­bury's Somerdale fac­tory, near Bris­tol, Kraft back­tracked and said it would close the plant.

The Takeover Panel re­viewed the laws and, in Septem­ber 2011, strength­ened the hand of tar­get com­pa­nies, and de­manded more in­for­ma­tion from bid­ders about their in­ten­tions af­ter the pur­chase, par­tic­u­larly on ar­eas such as job cuts.

In July last year, shortly af­ter be­com­ing prime min­is­ter, Mrs May promised to have a "proper in­dus­trial strat­egy" that could be used to block takeovers.

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