Prime Minister Theresa May ordered top officials to investigate if the proposed deal posed potential threats to British economic interests, the Financial Times reported.
May has been adamant the government should be more active in vetting proposed foreign acquisitions of UK companies. She had previously singled out Kraft’s 2010 acquisition of another British household name, Cadbury Plc, as an example of a deal that should have been blocked.
A deal for Unilever would have marked the next installment of Brazilian private equity firm 3G Capital Management Inc’s longstanding strategy of buying food companies and slashing costs.
In 2013, 3G teamed up with billionaire investor Warren Buffett to acquire Heinz and then purchased Kraft two years later. It is now the second-largest shareholder in Kraft, behind Buffett’s Berkshire Hathaway Inc (BRKa.N).
Unilever feared that a merger with Kraft, under 3G Capital’s relentless cost-cutting, risked eroding the value of its brands and could impede its expansion in emerging markets, which requires more investment, according to people familiar with the company’s thinking.
Unilever also saw its household products and consumer care divisions as too distinct from Kraft’s food business, the people added.
3G made its name in corporate America by orchestrating large debt-laden acquisitions and then slashing costs dramatically to juice profits. Using a strategy called zero-based budgeting, its managers must justify all expenses, from pencils to forklifts.