Published: Wed, February 22, 2017
Economy | By Melissa Porter

Unilever shares are tanking after Kraft Heinz killed its mega-merger bid

Kraft Heinz has called off its $143 billion cash and stock offer for Unilever Plc just two days after announcing its bid, which would have put some of the world's best-known names in consumer goods and vending under one roof.

On Friday, the company's London-listed shares jumped by 13%, which was worth a whopping $16 billion in market capitalization.

3G, which frequently invests alongside Warren Buffett, is determined to identify and execute a major takeover soon following the collapse of the Unilever deal on Sunday, said two people briefed on the company's situation.

Kraft Heinz, home of Heinz Baked Beans, has dropped its £115billion bid for Unilever, which owns Ben & Jerry's, Dove and Hellmann's, because there was "no merit, either financial or strategic" in the offer.

In a joint statement, Kraft Heinz said that it held Unilever "in high regard" and that it had "the utmost respect for its culture, strategy and leadership".

It's possible that the deal may also have broken down because of discontent among Unilever's shareholders, who were reportedly dissatisfied with the prospect of combining with a company of Kraft Heinz's stature. British Prime Minister Theresa May had asked officials to study the proposed takeover in the wake of the country's vote to exit the European Union.

The weaker pound since the Brexit vote made the takeover more attractive but the British government recently signalled it would look closely at foreign takeovers especially if job losses were expected.

Unilever rejected an approach from Kraft Heinz with regards to a potential merger, but Kraft-Heinz said that it meant to pursue the deal.

"It was always going to be a hard pitch to convince shareholders to relinquish their grip on Unilever, given the expectations for the company to keep churning out resilient growth in the years to come", George Salmon, Equity Analyst at Hargreaves Lansdown, told Reuters.

The management at Kraft Heinz believes that if this merger would have happened it would have helped in creating a leading consumer goods company.

Stocks in London edged higher in early trade, tracking a positive session in Asia, but volumes were expected to be a little lighter than usual with United States markets set to be remain closed for Presidents Day.

The rapid volte face saw Unilever's shares fall by almost 8% on Monday - their worst one-day performance since 2008 - after soaring by 13% on Friday to a record high when the firm revealed it had knocked back an initial approach.

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