US food behemoth Kraft Heinz has withdrawn from its US$143 billion (nearly NZ$200 billion) merger proposal with Anglo-Dutch consumer goods giant Unilever, after the latter rejected it two days prior.
According to experts, Kraft had made a surprise offer, but decided to ditch it because the company hadn’t expected to encounter such resistance from Unilever, and the public disclosure of its bid had made it too difficult to negotiate a new deal. Kraft, in fact, was forced to a premature disclosure of its offer soon after rumours of the approach started circulating, complying with Britain’s takeover rules. The regulations also state that takeover talks cannot be revived for six months after the public withdrawal of an offer.
With a combined entity worth US$82 billion in sales, it would have been the third-biggest takeover in history. Now Kraft seems to have abandoned the idea completely. A spokesperson from Kraft said the company had tried to proceed on ‘a friendly basis’, but found that Unilever wasn’t on the same page.
Behind Unilever’s decision, also according to experts, are strategical reasons. The company reportedly felt that a merger with Kraft would have eroded the value of its brands, especially in key emerging markets. The current impasse has led to speculation that Kraft might now find a new potential target, which Barclays analyst Andrew Lazar identified as Colgate-Palmolive.