Kraft withdraws offer to merge with Unilever

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Bottles of Heinz tomato ketchup of U.S. food company Kraft Heinz are offered at a supermarket of Swiss retail group Coop in Zumikon, Switzerland December 13, 2016.  REUTERS/Arnd Wiegmann
Bottles of Heinz tomato ketchup of U.S. food company Kraft Heinz are offered at a supermarket of Swiss retail group Coop in Zumikon, Switzerland December 13, 2016. REUTERS/Arnd Wiegmann
U.S. food company Kraft Heinz Co (KHC.O) withdrew its proposal for a $143-billion merger with larger rival Unilever Plc (ULVR.L), the companies said on Sunday, raising questions about Kraft’s next steps and whether it could turn its focus to another target.

Kraft had made a surprise offer for Unilever in a bid to build a global consumer goods behemoth that was flatly rejected on Friday by Unilever, the maker of Lipton tea and Dove soap.

Kraft withdrew its offer because it felt it was too difficult to negotiate a deal following the public disclosure of its bid so early following its approach to Unilever, according to people familiar with the matter who requested anonymity to discuss confidential deliberations.

Some key concerns raised during talks included potential UK government scrutiny as well as differences between the companies’ cultures and business models, one of the people said.

Kraft was forced to publicly disclose its offer to Unilever on Friday to comply with Britain’s takeover regulations, after rumors of its approach to Unilever circulated among stock traders.

Under U.K. takeover rules, Kraft’s public withdrawal of its offer precludes it from reviving takeover talks with Unilever for six months.

The companies did not provide details of the reason for ending the discussion in a statement.

A combination would be the third-biggest takeover in history and the largest acquisition of a UK-based company, according to Thomson Reuters data. The combined entity would have $82 billion in sales.

A merger would have been put under the microscope by UK regulators.

This weekend, Prime Minister Theresa May ordered top officials to investigate the proposed deal to see if it posed any potential threats to the country’s economic interests, the Financial Times reported.

May has been adamant that the government should play a more active role in vetting proposed foreign acquisitions of UK companies. She had previously singled out Kraft’s 2010 acquisition of another British household name, Cadbury Plc, as an example of a deal that should have been blocked.

A deal for Unilever would have marked the next installment of Brazilian private equity firm 3G Capital Management Inc’s longstanding strategy of buying up food companies and slashing costs.

In 2013, 3G teamed up with billionaire investor Warren Buffett to acquire Heinz and then purchased Kraft two years later. It is now the second-largest shareholder in Kraft, behind Buffett’s Berkshire Hathaway Inc (BRKa.N).

Under 3G, Kraft’s margins have widened to among the highest in the industry. They are around 30 percent, compared to 15 percent at Unilever.

The breakdown in deal talks sparked speculation among analysts and investors about whether Kraft might attempt to purchase another large consumer goods company as a backup plan.

Its bid for Unilever, where more than 60 percent of sales come from home and personal care products, signals a willingness to make big buys outside of its historic area of focus – food – said Sanford Bernstein analyst Ali Dibadj.

He cited Colgate-Palmolive Co (CL.N) as one potential target, noting that its stock popped 4 percent Friday on news that Kraft was eyeing Unilever.

REUTERS

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9 responses to “Kraft withdraws offer to merge with Unilever”

  1. (sorry offtopic) News agency, associated with the “Islamic state” has reported that on
    the night of February 19, IDF drone struck by rocket the calculation in
    northern Sinai.

    The report, which recounts the “Maariv”, says that a missile fired
    from an Israeli drone, four militants of the terrorist group Salafist
    persuasion “Vilayat Sinai”, which is considered the department of “Islamic
    state” in the Sinai Peninsula were destroyed.

    “IS Press Service” claims that the dead militants had the honor to become “martyrs.”

    The blow was struck at the time of preparation for the launch of a rocket in the direction of Eilat.

    Neither the Egyptian Ministry of Defense, nor the press service of the IDF does not comment.
    In recent weeks, terrorists attributed to Israel
    all airstrikes inflicted on targets in the northern part of the Sinai
    Peninsula.

    February 8 Eilat subjected to rocket fire from the territory of the Sinai Peninsula. at least four rockets were fired into Israel. Three of them were shot down by missile defense system “Iron Dome”, the fourth fell in open areas without causing damage. Fragments of the missile fell into the pool of one of the hotels in Eilat. Four foreign tourists needed medical aid for the withdrawal of state of shock.

    Responsibility
    for the shooting, carried out by 8 February, took over the group of
    “Vilayat Sinai” (formerly “Ansar Bayt al-Maqdis”) http://www.maariv.co.il/news/military/Article-575298

  2. The network has a video of an attack on brother of Kim Jong-un https://lenta.ru/news/2017/02/20/kimjongnam/

  3. State of Israel’s defense concern “Aviation industry” (TAA, IAI)
    and the Indian group Kalyani Strategic Systems Ltd (KSSL) signed a
    letter of intent to establish in India a joint venture that will focus
    on the development of air defense systems.
    The agreement was signed during the defense exhibition AeroIndia-2017
    and will operate under the Indian government’s policy of “Made in
    India”.
    KSSL two years ago in Hyderabad
    created a joint with Israeli concern “Rafael” company for the production of
    missile systems and other defense technologies

  4. UNHAPPY MEAL

    McDonald’s burger fail as kids’ meal arrives with a BITE already taken from the fast food treat https://www.thesun.co.uk/news/2950865/mcdonalds-burger-fail-as-kids-meal-arrives-with-a-bite-already-taken-from-the-fast-food-treat/

  5. The Government of India has approved on Thursday, February 23 decision to purchase a large batch of Israeli air defense missiles medium-range “Barak-8” total cost of 2.55 billion dollars

  6. PatienceTew Avatar
    PatienceTew

    Maybe Buffet’s coming to his senses?? Or, maybe he’ll start making Sees candies overseas???

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