Two Days Following The News Of Kraft Heinz’s Acquisition Proposal For Unilever (LON:ULVR) And Immediate Rejection, The American Consumer Goods Company Announces Its Withdrawal Of Its Takeover Bid Of The Anglo-Dutch Company, Sending Unilever Shares To Plunge Sharply On Monday Trading.
On Monday opening, Anglo-Dutch consumer goods company Unilever experienced a sharp plunge in the European markets after the announcement that Kraft Heinz Co (NASDAQ:KHC) withdrew their initial takeover bid just two days after the £115.05 billion merger proposal was made public.
Unilever shares (LON: ULVR) opened on Monday almost 8% or £262.50 lower at £3,537, and reached a low of £3,453.50 so far in the trading session.
From the time of writing, ULVR is trading 6.70% lower at £3,529.00 1219 GMT from the previous trading session on Friday, with a market cap at £100.34 billion. Upon the initial news publicized on Friday stating that Kraft Heinz has offered a £115.05 billion buyout value for Unilever on Friday, both company’s stocks climbed in the pre-market and market trading, as traders anticipated the deal to be the third biggest takeover in the food industry.
Kraft Heinz’s stock (NASDAQ: KHC) climbed 10.74% or $9.37 at $96.65 in the market, reaching a high of $97.77 with a market cap of $112.72 billion and dividend yield of 2.48%. Meanwhile, Unilever stocks climbed in the market on Friday as well, (LON: ULVR) £3,804, (NYSE: UN) $48.79, reaching a record of £114 billion to its market cap.
The company’s stock plummeted, even though most of the European indices opened on a bullish note, due to Kraft Heinz’s most recent announcement stating that the company is withdrawing their initial acquisition proposal for Unilever, which was rejected by the latter right away upon the proposal’s announcement.
In a joint statement, Unilever and Kraft-Heinz gave an official decision made saying, “Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies. Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever.”
European markets opened on Monday with a positive note, the pan-European STOXX 600 index was up 0.3%, while FTSE 100 climbed 0.1%, DAX increased 0.59%, and the Royal Bank of Scotland (LON:RBS) soared 4.33% upon opening bell.
Takeover Proposal Rejected
Kraft Heinz is a company backed by 3G Capital firm and American investor legend Warren Buffett. The company initially wanted to acquire the Anglo-Dutch consumer company with a target for creating a global consumer goods brand. Kraft Heinz offered a £115 billion ($145 billion) bid, but was immediately and unexpectedly rejected by Unilever.
Analysts speculate that Unilever CEO Paul Polman immediately rejected the offer seeing that Unilever will not gain any special financial or strategic merit our of the merger proposal.
“Kraft Heinz’s interest was made public at an extremely early stage. Our intention was to proceed on a friendly basis, but it was made clear Unilever did wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value,” states Michael Mullen, Kraft Heinz spokesman.
Several analysts believe that the reason behind Kraft Heinz’s decision to simply drop the takeover bid was the current political environment in Britain, which is currently against foreigners making bids for large UK companies, even for the half-Dutch Unilever.
Others believe that Kraft withdrew their bid because there are not willing to increase the offer price in order to go through with the negotiation, as Unilever initially made clear that they are not interested in seeing through a transaction with the American company, and that the initial bid offer greatly undervalues Unilever as a whole, ergo rejecting Kraft-Heinz’s offer right away.
In January, Unilever posted lower-than-expected fourth quarter earnings report, sending the company’s stock to plunge.