Welcome!
2017-02-20 00:42:11
Kraft Heinz Withdraws $143 Billion Offer to Merge With Unilever

On Friday, Kraft Heinz seemed determined to press ahead with a $143 billion takeover bid for Unilever, an ambitious campaign that would have put dozens of the best-known names in consumer households around the world under one roof.

But less than 48 hours later, Kraft Heinz’s board — including Warren E. Buffett and the Brazilian-born billionaire Jorge Paulo Lemann — decided to walk away.

The alternative would have been to pursue a public and possibly costly fight against Unilever, a bulwark of British and Dutch business.

Instead, the two consumer goods giants said on Sunday that Kraft Heinz had withdrawn its takeover bid after an agreement on friendly terms. As a joint statement from the companies put it, “Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever.”

The announcement swiftly ended what had been poised to become the biggest instance of consolidation within the food and consumer goods industry, at a time when giants in the fields have been looking to combine to command more space on grocery shelves. A combination of Kraft Heinz, itself the product of a mega-merger, and Unilever would have sold everything from Heinz ketchup and Oscar Mayer hot dogs to Hellmann’s mayonnaise, Dove soap and Lipton tea.

Kraft Heinz surprised the world when it disclosed on Friday, at the behest of the British merger regulator, that it had made a bid for Unilever. The disclosure came after a report in The Financial Times’s Alphaville blog said the two companies had held talks. Unilever quickly responded by saying that the $143 billion offer, a roughly 18 percent premium on the company’s closing stock price on Thursday, was too low and that it saw no reason to engage in talks.

Kraft Heinz had approached Unilever only a few weeks before and had hoped to court its target in private, according to people with knowledge of the talks.

Much of the food world had prepared for a potentially aggressive campaign by Kraft Heinz, whose backers at the Brazilian investment firm 3G Capital have long been known as swashbuckling deal makers eager to build up titans in the food and beverage industries. Along with Mr. Buffett, 3G had engineered a takeover of Heinz in 2013 and then Heinz’s merger with Kraft two years later, each in a multibillion-dollar deal.

By late last year, analysts and investors were speculating that Kraft Heinz was on the hunt for yet another major acquisition, although talk at the time centered on companies like Mondelez International, the former candy business of Kraft. Unilever, with its mix of food and household goods, had not been on many analysts’ radar screens, although they said its international profile and its strength in emerging markets would have complemented Kraft Heinz’s heavy focus on the United States.

Shares of Kraft Heinz jumped more than 10 percent on Friday while those of Unilever rose 15 percent, suggesting that investors in both were eager for a union.

While many on Wall Street had assumed that Kraft Heinz and 3G were prepared to fight for Unilever, Kraft Heinz and its backers had little desire to wage such a battle. That stands in contrast with how InBev, the 3G-backed beer company, pursued Anheuser Busch in 2008: InBev was prepared to oust Anheuser’s board before agreeing to raise its offer and reach a friendly deal.

Discussions among senior executives at Kraft Heinz and Unilever, as well as their advisers, underscored that Unilever was unwilling to proceed at any price. Moreover, the British government had expressed concern about the potential acquisition, citing the treatment of another British icon, Cadbury, after its takeover by Kraft in 2010, including accusations that Kraft reneged on promises to maintain hundreds of British jobs after the deal closed.

The chairman of Parliament’s business committee, Iain Wright, said on Friday that “a lot of very good British companies will be subject to fire sales without taking into account their performance and quality.”

One concern was 3G’s traditional playbook of extreme cost-cutting, down to replacing workers’ personal printers with communal ones and selling off extravagances like corporate jets. Unilever has been known for years for its commitment to environmental sustainability, although its chief executive, Paul Polman, has recently pushed for more cost-cutting initiatives as well.

While Kraft Heinz had been prepared to make a number of concessions — including raising its offer and keeping Unilever’s headquarters in London and Rotterdam — the appetite among Mr. Buffett, Mr. Lemann and other directors for waging a fight waned, leading to the decision on Sunday morning to withdraw. That move came well ahead of a deadline set by the British takeover panel; Kraft Heinz had to make a firm offer by March 17.

“Kraft Heinz’s interest was made public at an extremely early stage,” Michael Mullen, a spokesman for Kraft Heinz, said in a statement. “Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction.”

Kraft Heinz has been advised by Lazard and the law firm Paul, Weiss, Rifkind, Wharton & Garrison; Unilever received advice from the banks Centerview Partners, Morgan Stanley, UBS and Deutsche Bank.