While you were sleeping: Unilever stock drops

Tuesday 21st February 2017

European equities moved higher as gains in bank stocks offset a drop in Unilever shares after Kraft Heinz abandoned its bid to combine the two companies.

Shares of Unilever slid after Kraft Heinz withdrew its proposal for a combination with the Anglo-Dutch company.

“Unilever and Kraft Heinz hereby announce that Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies,” the companies said in a joint statement, according to media reports.

Unilever on Friday rejected a US$143 billion takeover offer from Kraft, the US company backed by 3G Capital and Warren Buffett’s Berkshire Hathaway.

People familiar with the talks at the weekend said 3G and Berkshire decided Unilever’s negative response made a friendly transaction impossible, Bloomberg reported.

"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," George Salmon, Equity Analyst at Hargreaves Lansdown, told Reuters.

Shares of Unilever ended the day with a 6.7 percent drop in London and closed 5.2 percent weaker in Amsterdam.

US markets were closed for the Presidents Day holiday.

Europe’s Stoxx 600 Index finished the session with a 0.2 percent advance from the previous close.

“There’s an acceleration in M&A activity given the improved economic outlook and while stocks still trade at low multiples,” Benjamin Philippe, fund manager at Degroof Petercam Gestion in Paris, told Bloomberg. “It’s spreading to a number of sectors including food, with Unilever in the spotlight as well as telecoms, where there’s potential for further consolidation.”

In Germany, the DAX Index rose 0.6 percent, bolstered by gains in Deutsche Telekom shares after a Reuters report that Japan's SoftBank is prepared to give up control of Sprint to Deutsche Telekom's T-Mobile US to clinch a merger of the two US wireless carriers.

France’s CAC 40 Index slipped 0.05 percent.

The UK’s FTSE 100 Index ended the day practically unchanged from the previous close, as a slide in Unilever shares offset gains in Royal Bank of Scotland Group.

Shares of Royal Bank of Scotland jumped 6.8 percent after it scrapped plans to sell its Williams & Glyn banking unit.

Meanwhile, Snap Inc kicked off its first investor roadshow, looking to persuade London money managers to back its initial public offering, Reuters reported.

The owner of popular messaging app Snapchat aims to raise between US$19.5 billion and US$22.3 billion from listing on the New York Stock Exchange, after cutting its initial target of between US$20 and US$25 billion last week following investor feedback, according to Reuters.

BusinessDesk.co.nz

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