US food giant Kraft Heinz shocked the financial world last night, scrapping its $140bn (£113bn) takeover bid for Unilever just two days after news of the offer was leaked.
Kraft said it had "amicably agreed" to abandon the proposed merger, which would have been the second largest in corporate history, and the largest ever acquisition of a UK-based company.
It could have also proved a major headache for Prime Minister Theresa May. During her Tory party leadership bid last summer, May promised to take a more interventionist approach to foreign takeovers.
Talks between Kraft's owners and the UK government had already been held over the weekend, while the company is believed to have approached major Unilever shareholders.
However, the US giant – which is owned by famous investor Warren Buffett and private equity firm 3G capital – performed a dramatic about-turn last night.
In a joint statement, Unilever and Kraft said: "Unilever and Kraft Heinz hold each other in high regard. Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever."
The initial takeover bid was announced on Friday, but was quickly rejected by Unilever on the basis that it undervalued the company.
Kraft spokesperson Michael Mullen said: “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 not 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. We remain focused on driving long-term value while always putting our consumers first.”
Under UK rules, Kraft had until 17 March to make another offer.
City A.M. understands Kraft was not prepared to sweeten its offer to a degree that would tempt Unilever's top shareholders. They had hoped to proceed with negotiations on a friendly basis in keeping with Buffett's track record on dealmaking.
Sources said that the situation was not helped by news of the deal having been leaked "early doors".
City analysts also believe investors were unimpressed by Kraft's advances.
"I guess Unilever's big shareholders told them where to go in talks this weekend," said Joshua Raymond, director at London foreign exchange broker XTB.
Earlier in the day it emerged the Prime Minister had ordered officials to look into the deal, raising the prospect of government intervention. Business minister Greg Clark had also spoken to high level Kraft executives on the phone, a conversation sources described as constructive – prior to Kraft's sudden change of heart.