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Unilever shares drop as Kraft pulls its offer

By Ben Woods

Shares in Unilever have slumped after US food giant Kraft Heinz called off its proposed 143 billion US dollar (£115 billion) mega-merger with the consumer goods firm.

The Anglo-Dutch company dropped around 7% on the London Stock Exchange following a joint statement by the two companies on Sunday which said Kraft Heinz had "amicably agreed" to withdraw its proposal.

Unilever had issued a strongly-worded rebuttal on Friday after the Chicago-based company tabled an offer representing an 18% premium on Unilever's closing share price on February 16.

If successful, the deal would have been the biggest acquisition of a British company on record based on offer value.

A joint statement by the two companies read: "Unilever and Kraft Heinz hereby announce that Kraft Heinz has amicably agreed to withdraw its proposal for a combination of the two companies.

"Unilever and Kraft Heinz hold each other in high regard."

Kraft Heinz brands include Heinz Tomato Ketchup and Philadelphia cheese, while Unilever owns store-cupboard staples such as Marmite, PG Tips and Hellmann's.

The proposed tie-up was expected to meet strong political opposition, with Prime Minister Theresa May said to have asked officials to look at the deal before it was abandoned.

Mrs May vowed last year to devise a ''proper industrial strategy'' to defend UK companies from being snapped up by foreign firms.

US and Asian businesses have ramped up their interest in buying British following the pound's 17% plunge against the US dollar since the Brexit vote.

George Salmon, equity analyst at Hargreaves Lansdown, said it was surprising to see the deal shelved just one business day after the news broke.

"The deal was set to top £100 billion, so the size premium would always have been a consideration - especially since Warren Buffett, one of the biggest names behind the bid, hardly has a reputation for paying anything other than the price he sees fit."

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