A deal threatened to put Theresa May’s newly interventionist industrial policy to the test, with critics lining up to demand action.
Fortunately, for her Government, a bit of huffing and puffing, combined Unilever’s less than favourable response to Kraft’s overtures, sent the predator back into the woods in search of other prey.
For now, Unilever’s shares tumbled in response, but significantly, they were still ahead of the price they stood at prior to Kraft’s interest being made known in early trading.
What that tells you is that the market thinks the reprieve granted to Unilever will be temporary.
The financial establishment viewed Kraft’s takeover quite favourably, at least if it were sweetened a bit. Kraft is a more profitable company than Unilever. It was felt that it could have unlocked a lot of value, and should have been given the chance if the premium proposed to take out Unilever was a little more generous.
Having robustly sent Kraft packing, Unilever CEO Paul Polman is now under pressure to show that he can deliver what Kraft claimed it could. He needs to narrow the gap between Unilever's margins and those enjoyed by Kraft’s investors.
The impact on jobs was high on the list of the UK Government's concerns about a deal. A lot of them are now going to be sacrificed on that altar.
Mr Polman will be only too well aware that his investors will demand he get on the phone to Kraft rather than then other way round if he doesn't improve the numbers. Cheez Whiz could still find a way into (ugh) Marmite.
Ms May’s willingness to do more than huff and puff could still be put to the test.
There was some snarky talk this morning about the Government's rumblings, with allegations of protectionism flying around. Some chose to point out how silly it is to see Unilever as a national treasure when it is, in fact, a half Dutch multi national that is no such thing.
None of which changes the fact that the deal, as mooted, would have been a horrible one for everyone other than the short term speculators who piled into Unilever shares, together with Warren Buffett and the private equity moguls who together control Kraft.
They would have created a behemoth with the power to squeeze the consumer. Their company would have been able to face down an uppity retailer like Tesco were it to kick up a fuss over a fresh attempt to drive up the price of, say, Marmite and other branded goods. As Tesco boss David Lewis, a former Unilever executive, recently did.
“What, you don’t like it? Tough. If people want our branded goods, they can go to Asda or Sainsbury’s if you threaten to take them off the shelves. In the long run you’ll suffer more than we do. You’ll come crawling back in the end because your investors will be asking why your customers are going elsewhere to pay through the nose for our products. They love our brands more than they love you and we've got an awful lot of brands.”
Of course, the competition authorities are supposed to stop that sort of thing from happening. But they have a habit of favouring “remedies” such as forcing companies to hive off bits of themselves in the wake of mergers, rather than blocking bad bids. Far easier to do that than to take a stand.
For now, all this is academic. Fodder for speculation and debate, and nothing more. The deal is dead, a wonder of the week that’s (mercifully) off the table.
But Kraft has all the time in the world.
The Takeover Panel's six month ban on a future approach will be over in the blink of an eye.
This should serve as a wake up call, and not just for Mr Polman. The public interest has been protected, but only temporarily.
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