Published: Wed, February 22, 2017
Business | By Patricia Jimenez

Kraft Heinz drops plans to acquire Unilever

In a joint statement, Unilever and Kraft-Heinz gave an official decision made saying, "Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies".

However the fact that Unilever's shares did not lose all of Friday's gains indicates investors still think there could be some kind of a deal in the future.

On Friday, the company's London-listed shares jumped by 13%, which was worth a whopping $16 billion in market capitalization.

Unilever's turnover was more than twice that of Kraft Heinz in 2016.

Fresh from pulling Kraft Heinz's bid for Unilever, the Brazilian investor group's restaurant roll-up pounced on fried-chicken chain Popeyes.

The failed tilt at Unilever revealed that 3G is ready to expand its reach beyond food, beverages and fast-food restaurants, the three consumer sector categories in which it has grown through its investments in Kraft Heinz, Anheuser-Busch InBev and Burger King, respectively.

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Kraft's move could flush out other bidders for Unilever, but of the potential rivals, USA consumer giant Procter & Gamble Co may face anti-trust hurdles, while pharmaceutical and consumer packaged goods company Johnson and Johnson would likely not be interested in household products. "Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction". Kraft's takeover of Cadbury seven years ago was the catalyst for changes in how foreign firms buy United Kingdom companies, and Prime Minister Theresa May had already asked officials to examine this deal.

When Kraft Heinz released its latest earnings report last week, industry analysts were somewhat surprised that there was no news of an acquisition in the works. The potential deal would have seen the merged entity compete with Nestle for the position of the world's largest packaged food manufacturer.

On Friday shares of Unilever jumped 14%, while Kraft Heinz jumped almost 11%.

Unilever on Friday rejected a US$143 billion takeover offer from Kraft, the USA company backed by 3G Capital and Warren Buffett's Berkshire Hathaway. The spokesperson also added that it was in the best interest of both the companies to "step away" in the initial stages so that they can both channel their energies on autonomous plans "to generate value". However, Unilever said that the offer fundamentally undervalues the company.

"Kraft didn't realise how hostile their approach would be perceived", one source said.

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