20 Feb 2017

Kraft and Unilever giving up on joint future

One of the most anticipated business marriages between Kraft Heinz and Unilever has finished prematurely, without even getting to sign the papers. Early this morning, the US food giant has announced that is withdrawing its offer of 115 billion pounds which was put on the table just 3 days ago.

The clash between the two companies started on Friday when Unilever rejected the offer by saying that they see in it “no merit, either financial or strategic”. It was expected that Kraft will continue the courtesy by offering more money but instead the two companies came up with a joined statement late on Sunday night, announcing the withdrawal of the US giant: “Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever.”

As part of the negotiations, the Kraft management team has been preparing for a meeting with Unilever shareholders including BlackRock and Leverhulme Trust and Legal & General in order to convince them in accepting the offered deal. But the pressure of the unions operating in the Anglo-Dutch company, Unilever has become reluctant and the deal was cut off.

The concern for the unions came from the controversial deal Kraft has signed in 2010 purchasing Cadbury for 11.5 billion pounds. Shortly after the purchase, Kraft has broken the promise that will save factories and divided the firm. Customers also complained that the quality of products was lower. The deal was also criticised by UK Prime Minister Theresa May who singled out the merge as an example of a deal that should have been blocked.

Therefore Unite, one of Britain’s biggest union, which represents 2000 of all the 7500 Unilever employees, welcomed the news of the failed deal between Kraft and the European giant. “It shows the need for a ‘Cadbury rule’ which takes into account the issues like jobs and consumers in these circumstances, so it’s not just down to how deep someone’s pockets are, to throw money at shareholders,” stated the spokesman of the union.

If the deal was successful, it would have been a landmark in corporate history, combining some of the major household brands, such as Ben & Jerry’s ice cream and Dove soap owned by Unilever and Heinz baked beans and Philadelphia cheese – in the portfolio of Kraft.