Consumer goods Kraft Heinz Fails to Buy Unilever

U.S. food group Kraft Heinz wants to buy British-Dutch detergent and soap maker Unilever for $143 billion. But Unilever has rejected the approach. A takeover would create a major rival for Henkel, Nestle and Danone.
Products made by Kraft Heinz.

It all happened in a matter of days. Kraft Heinz, maker of Heinz ketchup, on Friday said it wants to buy Unilever, the Anglo-Dutch maker of Dove soap and Magnum ice cream, and launched a massive new bid. The London-listed firm rejected the takeover, saying the price is too low and citing strategy issues. On Sunday night, Kraft Heinz apparently decided the opposition was too strong and pulled its bid.

The offer would have been worth a whopping $143 billion, according to Unilever calculations. Unilever on Friday said it had received an offer of $50 per share, made up of $30.23 in cash and the remainder in shares in the new group, 18 percent higher than Thursday's closing price. Unilever's shares surged had climbed as much as 15 percent in London to 3848 pence on Friday, valuing the maker of Lipton tea and Axe deodorant at more than €113 billion pounds, or $140 billion, according to Bloomberg, but plunged back down around 7 percent Monday as the deal collapsed over the weekend.

Kraft Heinz counts Warren Buffett’s investment firm Berkshire Hathaway, private equity firm 3G and German-Austrian billionaire family Reimann among its investors.

Though Unilever had no interest, there had been speculation that a smaller deal could be in the works.

"Although there was little incentive for Unilever to accept this initial merger offer, Kraft Heinz and 3G Capital’s willingness to pursue a deal could ultimately encourage Unilever to seek a deal to offload some of its food brands, to which Kraft Heinz would seek to apply aggressive cost reductions," Raphael Moreau, food analyst with Euromonitor International, said in an email.

Unilever and Kraft Heinz rank as the world's fourth and fifth-largest players in the global packaged food sector behind Nestle, PepsiCo and Mondelez, according to Euromonitor data. German-based Henkel is also a big rival in the market for detergents and hair care products, while Frankfurt-listed Beiersdorf competes in the skin care market with its brand Nivea.

The two companies could have complemented each other's operations, because Unilever is mostly focused on detergents and cosmetics, while Kraft Heinz is focused on food and beverages, including Philadelphia cream cheese and Capri Sun juices.

Kraft Heinz counts Warren Buffett’s investment firm and private equity firm 3G among its investors. The two investment companies were the driving forces to merge Kraft and Heinz in 2015. The German-Austrian billionaire family Reimann is also a minority owner of Kraft Heinz.

Kraft Heinz is half as big as Unilever, making $26.5 billion in sales in 2016, compared with €52.7 billion, or $56.2 billion, for the Anglo-Dutch company.

 

Christoph Kapalschinski covers consumer goods, textiles and food for Handelsblatt. Gilbert Kreijger is an editor with Handelsblatt Global, covering companies and markets. To contact the authors: [email protected] and [email protected]

This story was updated Monday with news that Kraft-Heinz had withdrawn its offer.