Kraft Heinz ditches Unilever takeover plans

19th Feb 2017 22:15

(ShareCast News) - Kraft Heinz has ditched its plans to take over Unilever, just two days after it emerged the London-listed consumer goods giant had rejected a $143bn offer.On Friday, Unilever said it had declined the offer from Kraft, which represented a premium of 18% to the closing share price the day before, saying it fundamentally undervalued the company and had "no merit, either financial or strategic".Despite Unilever's rejection, Kraft said it was looking forward to working with the group to reach an agreement on the terms of a transaction.However, on Sunday, a spokesperson for Kraft said: "Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction."It is best to step away early so both companies can focus on their own independent plans to generate value. We remain focused on driving long-term value while always putting our consumers first."Unilever released a statement saying: "Unilever and Kraft Heinz hereby announce that Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies."Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever."Kraft had offered Unilever $50.00 per share in a mix of $30.23 per share in cash payable in US dollars and 0.222 new enlarged entity shares per existing Unilever share.Jefferies said it expects Unilever's shares to revert to something closer to where they were on Thursday."But we expect the seismic shock to reverberate for a while yet: not least in terms of what it means for value perceptions of Unilever and whether KHCmight yet offer a welcome home for some or all of Unilever's Foods assets."Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor, said: "The abrupt withdrawal of the Kraft Heinz offer leaves huge questions for Unilever shareholders. Typically, even a failed bid like this one will leave the share price trading at a premium to its pre-bid level, as investors factor in the possibility of either a future bid or increased interest from the wider market."However, not only does Unilever's board appear very hostile to a bid, but the strength of Dutch competition laws which potentially protect employees from aggressive asset stripping type deals makes any takeover by 3G extremely difficult. The 15%+ rally last week as market whispers got going and the offer was finally announced has only been met with a 7% fall this morning. While attention has undoubtedly increased interest in the stock, establishing fair value for the stock has now become extremely difficult for both existing and potential investors."At 0837 GMT, Unilever shares were down 8.2% to 3,485p.