Unilever rejects Kraft Heinz’s $143B acquisition bid
February 21, 2017 – According to some prominent news reports, Unilever has rejected a 143 billion Dollar bid, which was made by Kraft Heinz for acquiring Unilever. Kraft Heinz is a multinational food company and it was formed in 2015 as a result of a merger of two companies namely Kraft Goods Group and Heinz. Two big investors were behind this deal providing the backup [backup as in providing the money.] Today, Kraft Heinz is one of the top food product manufacturers in United States of America. Their annual revenue is little shy of $27 billion! The number of employees working for this company is approximately 43,000.
Unilever is even bigger consumer goods manufacturer. This British-Dutch multinational company is a behemoth when it comes to gauging world’s top consumer product producers. The company’s annual revenue is above $60 billion and more than 170,000 employees are working for them in different countries. Unilever has a much bigger geographical footprint compared to Kraft Heinz.
History tells us that Kraft has a history of acquiring its competitors, but this time around, they tried to chew a company which is a lot bigger. They submitted a gigantic 143 billion dollar bid hoping that they were going to acquire their biggest competitor. If this deal was successful, then it would have made Kraft the world’s biggest food/consumer-products manufacturer. Obviously, this would have been good for Kraft, it’s investors, and the shareholders, but this deal wouldn’t be good for the consumers. If Kraft buys every competitor in the market, then they will have a complete monopoly in the food and consumer products market.
Kraft’s proposal got a very strong response from Paul Polman, the current CEO of Unilever; he rejected the proposal and didn’t even agree to come to the table to discuss this matter. This is a clear sign that Unilever has no interest in a sell-out. After seeing this hostile reaction, Kraft publicly backed out from their proposal.
Some news reports suggest that UK’s Prime Minister, May, may have ordered a scrutiny of this deal. But the UK government has already announced that they didn’t interfere in this deal. On the other hand, analysts say that the UK government has signaled that they will examine any deals that involve acquisition of a UK based company by a foreign entity.
When the news of this proposal had hit the wire, price of Unilever shares initially went up. The share price increased by more than 12 percent, but after the withdrawal of Kraft’s bid, the share price went down to [approximately] where it was before.