Unilever shares fall sharply after Kraft Heinz £115bn takeover bid is dropped

Unilever shares fell more than 6 per cent on Monday having soared more than 13 per cent on Friday after Kraft confirmed that it had made a bid

Josie Co
Business Editor
Monday 20 February 2017 09:21
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Unilever shares were down 7 per cent having soared more than 13 per cent on Friday after Kraft confirmed that it had made a bid
Unilever shares were down 7 per cent having soared more than 13 per cent on Friday after Kraft confirmed that it had made a bid

​Shares in Unilever fell sharply on Monday, a day after Kraft Heinz dropped its £115bn ($143bn) offer to buy the consumer goods giant, a takeover that would have been one of the biggest ever in corporate history.

Shares in the company ended the day more than 6 per cent lower, having soared more than 13 per cent on Friday after Kraft confirmed that it had made a bid, that was rejected by Unilever for being too low and having no “financial or strategic” merit.

Kraft, which is controlled by private equity firm 3G Capital and veteran financier Warren Buffett, is best known for brands like Philadelphia spread, Capri Sun soft drinks, HP Sauce and Heinz ketchup.

Unilever’s brands include Domestos, Dove and Persil.

Had a deal gone through, it would have been one of the biggest takeovers in history and the biggest ever acquisition of a UK-based company, Thomson Reuters data shows.

“Looks like Unilever was just asking too much to make it work for Kraft Heinz,” Neil Wilson, a market analyst at ETX Capital, said.

“There is little doubt that the meetings over the weekend with the Government left the US firm with too much work to do to convince the authorities,” he added.

Global corporate merger and acquisition activity has flourished in recent quarters and last month marked the busiest January for deals in Europe, the Middle East and Africa in over a decade, according to data from Thomson Reuters.

Deals completed last month in the region had a total value of $90.8bn, according to the company, which was the highest volume for any January since 2006.

Johnson & Johnson’s $29.3bn takeover of Swiss biotech company Actelion and the $25bn merger of Italian eyewear group Luxottica and France’s Essilor particularly boosted volumes.

Cross-border deals also rose to their highest January level since 2006 this year, hitting $106.8bn, up 31 per cent on January 2016.

Globally, M&A activity hit $258.2bn in January, a 38 per cent surge on the same month last year and the highest level for the month since 2011, according to Thomson Reuters.

News of the abandoned deal between Kraft and Unilever comes at a challenging time for both companies.

Kraft, which is the world’s fifth-largest food and beverage company, has in recent years been forced to adjust its product range to adjust to consumers’ changing preferences and a trend towards fresher, non-packaged items.

On Thursday, the company announced that sales had fallen 3.8 per cent to $6.86bn in the quarter to the end of December, hit by a stronger dollar and lower demand.

Last month Unilever reported lower-than-expected fourth-quarter sales as a result of the Indian government’s withdrawal of high-value notes and a weak economy in Brazil.

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