Kraft Heinz has ‘amicably agreed’ to withdraw its interest in Unilever, after having a $143 billion approach rejected by the Anglo-Dutch food giant on Friday.
In a joint statement, Kraft Heinz said that it held Unilever ‘in high regard’ and that it had ‘the utmost respect for its culture, strategy and leadership’.
FoodBev broke news of the initial $143 billion offer on Friday, which Unilever claimed grossly underestimated its total value.
It’s possible that the deal may also have broken down because of discontent among Unilever’s shareholders, who were reportedly dissatisfied with the prospect of combining with a company of Kraft Heinz’s stature.
Unilever has a track record of investing in sustainable and ethical business, while Kraft Foods — one of the two constituent parts of Kraft Heinz — was criticised in the UK following its successful takeover bid for Cadbury in 2009.
Kraft Foods cut 200 jobs from Cadbury’s production site in Bournville and a further 400 at Keynsham as production was moved abroad.
Unilever’s turnover was more than twice that of Kraft Heinz in 2016.
How Kraft Heinz’s takeover bid emerged
Unilever rejected an approach from Kraft Heinz with regards to a potential merger, but Kraft-Heinz said that it intended to pursue the deal.
US-based Kraft Heinz said it made ‘a comprehensive proposal’ to the Anglo-Dutch consumer goods company but that the proposal was declined. The proposed combination would have created ‘a leading consumer goods company with a mission of long-term growth and sustainable living’, as well as a giant in the food industry with a breadth of brands across the food, beverage and dairy categories.
Unilever owns Lipton iced tea, a number of spreads like Marmite and Hellmann’s, plus ice cream brands including Magnum, Ben & Jerry’s and Wall’s.
Kraft Heinz is made up of its two original constituent parts – Kraft and Heinz – which between them manufacture a host of well-known products including Heinz tomato ketchup and baked beans, Philadelphia cream cheese, Kraft cheese slices and Capri-Sun juices.
It has been less than two years since Kraft Foods and HJ Heinz merged to form a joint entity.
A combined business would have generated annual revenue of more than €77.5 billion, making it the world’s second biggest food company, second only to Nestlé.
Shares in Unilever jumped by more than 10% after news of the offer was made public. According to reports, the value of the rejected deal was in excess of £100 billion.
Paul Hickman, analyst at Edison Investment Research, said: “Kraft Heinz’s approach demonstrates the pressure on brand owners to consolidate in the face of international pressure on margins and constraints to organic growth opportunities. With about 70% of revenue from Europe and Asia, Unilever’s markets were complimentary to Kraft Heinz, which has around 70% in the US.”
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