Surprise as Kraft pulls £112bn Unilever bid

Kraft (or Kraft Heinz as it now is following the merger of the two American food businesses by Warren Buffett’s Berkshire Hathaway and Brazil’s 3G Capital) has pulled its mooted £112bn takeover of Anglo-Dutch Unilever, “amicably” it seems.

Which makes you wonder why they did it in the first place if Unilever CEO’s Paul Polman’s vigorous rejection of the offer – no strategic or financial sense – was so disabling. Polman and co. were never going to roll over in the face of cost-cutting Kraft (whose sales are about half Unilever’s). Polman’s Unilever is trying to save the world through brands – “sustainability” – while Kraft is just trying to make money. 3G Capital is the agency behind the £82bn merger between Brewers AB InBev and SAB Miller.

The takeover was revealed in the FT’s Alphaville blog last week and maybe that spooked Kraft Heinz into laying its cards on the table. Much good it seems to have done them. Shareholders seem to have put this one into the “too difficult” draw, not least for political reasons.

Has Kraft really gone away or is it biding its time? After all, shareholders saw Unilever’s price rocket when the bid became public.

It’s a poser for Polman too. Unilever’s a difficult takeover target because of its joint Anglo-Dutch domicile. And respectable financial performance.

But if it’s going to keep the likes of Kraft at bay it need to be bigger: as big as Procter & Gamble or Nestle, around $230bn. It could buy Mondelez (about $70bn) or Kraft, even.

As for adland, it will breathe a big sigh of relief. Agencies and others would far sooner work for Unilever than Kraft. But Unilever is likely to become far more cost-conscious after this (for now) narrow escape.

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About Stephen Foster

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Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.