Kraft calls off Unilever bid amid mutual praise

20 Feb 2017

Only two days after proposing one of history's biggest corporate mergers ever, consumer giant Kraft Heinz on Sunday abruptly called off its pursuit of Unilever.

News that the proposed $143-billion deal, what would have been the third-largest of all time, was kaput came in a terse joint statement from the two companies.

It said that Kraft Heinz "had amicably agreed to withdraw its proposal for a combination of the two companies."

Even though Kraft Heinz's offer had been unsolicited and could have set up a fight for control of Unilever, the statement dripped with pleasantries and assurances of mutual respect.

"Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever," it read.

Rather than embracing Kraft Heinz's offer Friday, Unilever didn't take long to reject it based on price alone. Kraft Heinz's offer "fundamentally undervalues" the company, said Unilever at the time. (See: Kraft Heinz may sweeten offer as Unilever rejects takeover bid).  Plus, it said, it "sees no merit, either financial or strategic, for Unilever's shareholders. Unilever does not see the basis for any further discussions."

The statement dashed Kraft Heinz's hopes that Unilever would quickly come around to its point of view.

The news is sure to disappoint investors, who sent the stock of both companies rising on Friday before the market closed for the weekend. The deal would have united two companies that make dozens of products that millions of people depend on every day, even if the two companies weren't seeing staggering growth.

Kraft Heinz makes Oscar Mayer luncheon meats, Philadelphia spreads and Maxwell House coffee, among other things. Unilever's brands include Dove soap, Lipton tea and Best Foods/Hellman's mayonnaise.

The deal would have been eclipsed only by two past mergers - Mannesmann-Vodafone and Time Warner-American Online, according to S&P Global Market Intelligence.

Kraft Heinz, the food conglomerate backed by investor Warren Buffett, had on Friday proposed to pay $50 a share for the company, offering a mix of cash and stock. That would value Unilever at more than $140 billion, nearly 20 per cent higher than Thursday's closing price.

But Unilever said the offer "fundamentally undervalues" the company. Kraft Heinz then suggested the company could make another offer – but this is clearly not happening now.