Kraft's Unilever Bid Could Face Two Sides of Regulatory Coin -- 2nd Update
February 17 2017 - 7:14PM
Dow Jones News
By Jenny Gross, in London Natalia Drozdiak in Brussels and Maarten van Tartwijk in Amsterdam
Kraft Heinz Co.'s plan to swallow Unilever PLC with a $143
billion offer doesn't just face winning over Unilever, which
quickly said "no thanks" on Friday.
Should the Anglo-Dutch giant change its mind, antitrust
regulators in the U.S., Europe and beyond are likely to give the
deal close scrutiny. Unilever and Kraft are the No. 4 and No. 5
packaged-food makers globally by market share, respectively,
according to Euromonitor. But their footprints are varied around
the world. Kraft is much bigger in the U.S., while Unilever is
stronger in several emerging markets.
The next potential takeover target for 3G Capital Partners --
the group, which along with Warren Buffett, orchestrated the 2015
Kraft Heinz merger and remains its biggest shareholder -- has been
the center of much speculation lately. A lot of attention from
analysts and investors focused on big U.S. food companies like
Mondelez International Inc. But some questioned whether such a move
-- and the workforce consolidation that could follow -- would run
afoul of the Trump, which has made protecting U.S. jobs a priority
and hasn't been shy about confronting companies over it. Setting
Kraft's sights abroad could help sidestep such concerns.
Kraft's desire to expand its overseas operation could have
political support at home as its workforce is just a quarter of the
size of Unilever and the U.S. company already has attacked costs
with its zero-based budgeting approach. The Trump administration
has made clear its opposition to company moves that cost U.S.
jobs.
The offer could raise more complicated political issues in
Europe. Unilever has its headquarters in both the U.K. and the
Netherlands. A proposed combination also would put another U.S.
deal on the agenda of the continent's antitrust authorities in
Brussels, which are weighing a deal between Dow Chemical Co. and
DuPont Co.
The European Commission has been taking an increasingly
skeptical view of large consolidation moves in various industries
in the wake of some big, complex mergers in the beer, agriculture
and financial-services sectors.
"The times of business as usual, big is beautiful, are
completely gone" in Europe, said Nicolas Petit, a professor of
competition law at the University of Liège. "In the past two years,
the pendulum has swung back [for regulators,] and concentration
matters again."
In the U.K., Kraft has stirred controversy in the past. In 2010,
it acquired Cadbury PLC, in a tie-up that ended the independence of
Britain's most famous candy company. At the time, U.K. lawmakers
accused Kraft of going back on a pledge to keep a factory open.
Kraft has said after a closer look, it realized plans to move
production overseas were too far along to reverse. Prime Minister
Theresa May in July took specific aim at Kraft's takeover of
Cadbury during her campaign to become leader.
Britain's Unite trade union said in a statement Friday it
opposed a Kraft-Unilever deal. The U.K. government said it was
aware of the approach but wouldn't comment on specifics.
The U.K. is also in the middle of a bruising process of
disentangling itself from the European Union, after a June
referendum that sent sterling tumbling. That could draw any
Kraft-Unilever deal into the bitter debate there over Brexit.
"Sterling's slump has left us in greater danger of losing
control of some of Britain's best and biggest companies to distant
multinational ownership," said Chuka Umunna, a member of Parliament
for the opposition Labour Party, which opposed Brexit.
In the Netherlands, Unilever employs around 3,000 people and
operates several plants and a research lab. The company was founded
in 1929 through the merger of British soap maker Lever Brothers and
the Netherlands' Margarine Unie, which began making the butter
substitute in 1872.
Prime Minister Mark Rutte, himself a former human-resources
director at the company, called Unilever "an important company, a
proud company" and said his government will monitor developments.
Mr. Rutte, though, said the approach by Kraft is "primarily
Unilever's business and not the government's."
While the European Commission hasn't blocked any of the largest
mergers recently, it has sought considerable remedies, though. In
2016, it required Anheuser-Busch InBev SA's to shed almost all of
SABMiller's European assets as a condition of approving that
roughly $108 billion combination.
Write to Jenny Gross at jenny.gross@wsj.com, Natalia Drozdiak at
natalia.drozdiak@wsj.com and Maarten van Tartwijk at
maarten.vantartwijk@wsj.com
(END) Dow Jones Newswires
February 17, 2017 18:59 ET (23:59 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Unilever (LSE:ULVR)
Historical Stock Chart
From Aug 2024 to Sep 2024
Unilever (LSE:ULVR)
Historical Stock Chart
From Sep 2023 to Sep 2024