Shares in Unilever finished more than seven per cent lower today after talks around a potential deal with Kraft Heinz were called off over the weekend.
The proposed takeover was revealed on Friday, sending FTSE 100-listed Unilever's share price up 15 per cent, and Kraft's up by 4.3 per cent in pre-market trading in New York.
However, yesterday 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.
Not all shareholders were displeased. Blake Hutchins, a portfolio manager at Investec, said: “We believe Friday’s $140bn (£113bn) bid materially undervalued the company, and at that valuation Unilever is better off as a standalone business, than as part of Kraft Heinz.”
It was reported on Monday that Kraft Heinz owner 3G Capital, a private equity group, has up to $15bn to use on its next mega-deal. The Financial Times reported that the group wants to target a new takeover soon.
Hargeaves Lansdown analyst George Salmon said: "What exactly happened in this whirlwind of a story is yet to be fully revealed, but it looks like Unilever isn’t just playing hard to get. It was always going to be a difficult pitch to convince shareholders to relinquish their grip on Unilever, given the expectations for the company to keep churning out resilient growth in the years to come.”
Michael Hewson at CMC Markets noted: "There had been widespread speculation that this bid may well have turned out to be a rather protracted affair given some of the politics involved. Kraft’s quick about-turn appears to have drawn a line under that, over concerns that any public battle could have the potential to turn increasingly bitter.
"Kraft’s track record on this was also undoubtedly a factor, particularly given the Cadbury experience in 2010. While the share price fall is its biggest in 13 years, the shares are still higher than they were prior to the Kraft bid becoming public. While this bid appears to have fallen at the first fence it undoubtedly keeps the focus on a sector that could see further consolidation."
The deal could have 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.