Image source:
What's going on?
Kraft Heinz, the American food giant that makes the eponymous ketchup, said on Friday that it had made a $143 billion attempt to take over Anglo-Dutch rival Unilever but by Sunday things had changed…
What does this mean?
Unilever, which makes Marmite, Dove soap and many other products, quickly rejected the bid, claiming that it undervalued the company. It appeared initially that Kraft would be unwilling to quietly go away, as it said it was committed to reaching an agreement. However, on Sunday, Kraft said it was withdrawing its bid. The deal would have combined two of the worlds biggest players in packaged foods. (tweet this)
Why should I care?
The bigger picture: Deals often fall apart but this seems like a strange case.
Most investors seemed to think that Fridays news was the opening bid in what would be a negotiated takeover of Unilever. Sundays news that Kraft was walking away came as a surprise. Kraft, apparently, sought to engage in friendly negotiations with Unilever, but Unilever showed resistance to the idea. In other cases, a potential acquirer might make a higher bid or try to convince the target companys shareholders of the merits of the deal. All in all, its a little odd that Kraft would simply walk away.
For markets: Shareholders of both companies loved the idea.
The share prices of both Unilever and Kraft jumped more than 10% on Friday. The jump in Unilevers share price reflected Krafts plan to pay Unilevers shareholders a premium (i.e. a price higher than its shares were trading at prior to the initial news breaking) to take it over. Krafts shareholders seemed to like the deal rationale as well. Both sets of shareholders look set to be disappointed when the shares open for trading on Monday…
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over one million Finimizers
