Kraft Heinz withdraws bid to buy Unilever

— Ketchup maker and packaged food giant Kraft Heinz has withdrawn a $143 billion offer to buy Unilever, backing away after the mayonnaise, tea and seasonings maker rejected the bid as too low.

The companies announced the decision Sunday in a joint press release, saying that Kraft Heinz has “amicably” abandoned the offer.

“Kraft Heinz’s interest was made public at an extremely early stage,” spokesman Michael Mullen said Sunday in an

emailed statement. “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. We remain focused on driving long-term value while always putting our consumers first.”

The decision to withdraw the offer came after 3G Capital and Warren Buffett’s Berkshire Hathaway Inc., which together own about half of Kraft Heinz, decided that Unilever’s negative response made a friendly transaction impossible, leaving no choice but to walk away, people with knowledge of the situation said. Both also believed that a protracted war of words wasn’t in the best interest of Kraft Heinz and would risk souring future deal opportunities, the people said, asking not to be named because the process was private.

Representatives for Berkshire Hathaway and Brazilian investment firm 3G didn’t respond to messages seeking comment Sunday.

The deal would have combined Kraft Heinz brands such as Oscar Mayer, Jell-O and Velveeta with Unilever’s Hellman’s, Lipton and Knorr. The merged company would have rivaled Nestle as the world’s biggest packaged food maker by sales.

Analysts say Kraft Heinz, co-headquartered in Pittsburgh and Chicago, is still in the market for acquisitions. The fact that it bid for all of Unilever and not just its food business indicates that Kraft Heinz is potentially open to acquiring other packaged consumer goods, one analyst said.

Unilever, which has a head office in London, also has a stable of personal care brands such as Dove soap. Unilever rejected the offer Friday, but despite that, Kraft Heinz said at the time that it was still interested in the deal.

Such acquisitions might not lead to big changes that customers would notice on supermarket shelves, but shifting tastes are partly driving deal-making in the food industry.

Part of the challenge is the proliferation of smaller food makers marketing products that seem more wholesome, which makes it harder for the established companies to drive up sales simply by selling more of well-known products or by raising prices, as they have in the past.

“That obviously has its limits,” said David Garfield, head of the consumer products unit at consulting firm AlixPartners, said last week.

Instead, major packaged food companies are being forced to dig deeper to find cost efficiencies or tap into new markets, Mr. Garfield said. That can include mergers that result in consolidated manufacturing systems, or that give companies access to distribution networks in regions of the world where they don’t have a big presence.