Kraft backs out of Unilever bid after hostile reception

Tue Feb 21, 2017 2:53pm EST
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By Pamela Barbaglia and Kate Holton

LONDON (Reuters) - Kraft Heinz Co's (KHC.O: Quote) rapid retreat from its surprise $143 billion bid for Unilever (ULVR.L: Quote) (UNc.AS: Quote) in the face of stiff resistance knocked the Anglo-Dutch company's shares on Monday as investors assessed the impact of the failed approach.

Kraft, which is backed by Warren Buffett and the private equity firm 3G, wanted to buy Unilever as part of its strategy to become a global consumer goods giant by buying competitors and cutting costs and jobs to drive profits.

However, the U.S. food group had not factored in Unilever Chief Executive Paul Polman dismissing its offer as having no financial or strategic merit and refusing to come to the table.

The vehemence of this response, along with fears of a political backlash, was enough to put off 86-year old Buffett, whose Berkshire Hathaway (BRKa.N: Quote) has a long-held aversion to making hostile bids, sources told Reuters.

"Kraft didn't realize how hostile their approach would be perceived," one source said.

A source close to Kraft said its officials alerted Britain's Business Secretary Greg Clark in a brief call on Friday soon after it made its approach public. Kraft laid out its plan to create a consumer goods behemoth with headquarters in the United States, Britain and the Netherlands and promised to keep Downing Street informed on any developments.

For Kraft, Britain's response was a major concern after Prime Minister Theresa May signaled she would take a more proactive approach to foreign takeovers, sources told Reuters.

May, who had previously singled out Kraft's 2010 acquisition of another British household name, Cadbury Plc, as an example of a deal that should have been blocked, had indicated her government would want to examine the deal if it went ahead, according to a person familiar with the situation.   Continued...

FILE PHOTO --  A Heinz Ketchup bottle sits between a box of Kraft macaroni and cheese and a bottle of Kraft Original Barbecue Sauce on a grocery store shelf in New York City, New York, U.S. March 25, 2015.  REUTERS/Brendan McDermid/File Photo