Kraft Heinz pull out of multi-billion pound takeover of Unilever
FTSE 100 struggles as failed takeover bid causes Unilever shares to plummet
by Abi Moses on 20th February, 2017
The FTSE 100 index has been rocked by the news that Heinz Kraft have pulled out of their takeover of Unilever amidst fierce political opposition.
The purchase would've been the biggest ever takeover of a UK-listed company and the second largest ever. The deal thought to be in the region of £115bn was rejected by Unilever who believe the company has been undervalued. Experts are now predicting further bids for some of the UK's largest companies. The weak post-Brexit Pound has left firms vulnerable to foreign takeover bids. British firms have been labelled as "sitting ducks."
Kraft Heinz itself was, as its name suggests, the creation of a merger of two of world's leading brands in Kraft Foods Group and Heinz. A merger with Unilever would've made the new firm the second largest food and beverage company in the world, just behind Nestle. Bringing together some of the world's best known brands; including Heinz Ketchup and Philadelphia and Unilever's Dove, Lynx and Hellmann's.
Despite Kraft Heinz having huge revenue of £21bn and 42,000 employees worldwide, the Anglo-Dutch firm it intended on purchasing is considerably larger with £45bn in revenue and 168,000 employees. The size of Unilever and the controversy associated with Kraft's 2010 takeover of Cadbury's led to UK Prime Minister, Teresa May instructing the scrutiny of any takeover.
City Index research director, Kathleen Brooks, claimed "We expect the chief reason to drop the bid was concern about the political atmosphere in Britain, which is currently against foreigners making bids for 'national treasures', even half-Dutch ones like Unilever."
In an unprecedented move, both firms announced the deal was off in a joint statement released on Sunday evening. The statement confirmed "Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies. They continued by saying "Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever."
Unilever's chief executive, Paul , urged his companies largest shareholders to reject the deal, claiming the takeover would "destroy its long term approach."
The announcement that the deal was off saw shares in Unilever plunge by more than 7% at the start of trading on Monday and the firm are now expected to record their worst day in almost nine years.
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