May orders officials to examine Kraft Heinz’s bid for Unilever
The $143bn approach is a big test for the prime minister’s industrial policy
Theresa May has ordered her top officials to examine Kraft Heinz’s proposed takeover of Unilever to see if it raises concerns for the wider British economy and merits government intervention.
The $143bn takeover approach, revealed on Friday, is a big test for Mrs May’s industrial policy. Immediately before she became prime minister, she called for more powers to block predatory takeovers of key companies — citing Kraft Foods’ 2010 takeover of Cadbury. The US company, which later split off its snacks business, reneged on a promise to retain factories and jobs in Britain.
When UK companies were bought or forced to close, she said, “workers have a stake, local communities have a stake, and often the whole country has a stake”.
Mrs May has been criticised for presiding over a “fire sale” of British companies following the sharp post-Brexit vote depreciation of sterling. But her legal powers to intervene in foreign takeovers are limited and Philip Hammond, chancellor, has led opposition to the introduction of a wider public interest test. Downing Street on Sunday declined to comment on any plans to consider intervening in the Unilever bid.
British ministers are only allowed by law to prevent foreign takeovers on grounds of national security, financial stability and media plurality. They can, however, use other policy levers such as state industrial assistance, research grants and infrastructure to try to win concessions from a foreign bidder in a takeover.
The prime minister’s team has held talks with both Unilever and Kraft Heinz — a company known for its aggressive cost-cutting — to see what the implications of its plans are for jobs, research and development, as well as for Unilever’s headquarters operations and listing in the UK. Unilever has 7,500 staff in the UK, based at its London headquarters and three research facilities at Port Sunlight, Colworth and Leeds.
Unilever’s other headquarters and listing is in the Netherlands, where politicians have been noticeably quiet about the proposed takeover. Mark Rutte, the Dutch prime minister, was formerly a human resources manager at the company. Kraft Heinz has until March 17 to table a firm bid or walk away — two days after the Dutch elections.
The government’s recently launched industrial strategy includes a promised new regime to cover foreign investments in “critical national infrastructure”, although that is expected to focus on sensitive sectors, specifically nuclear power.
Alongside the battle for Unilever, Mrs May faces another challenge to UK manufacturing with plans by French carmaker PSA to acquire General Motors’ European operation Opel, which includes Vauxhall of the UK. The prime minister is due to meet Carlos Tavares, PSA’s chief executive — and another renowned cost-cutter — next week as talks between the two businesses move towards a conclusion.
Greg Clark, the UK business secretary, travelled to Paris this week to offer PSA, owner of Peugeot and Citroen, comparable assurances to the ones given to the Japanese carmaker Nissan, in an effort to save the Vauxhall plants at Ellesmere Port and Luton from closure.
Mr Hammond has argued strongly that if Britain is serious about forging a future outside the EU as a global trading champion, it cannot intervene to prevent flows of foreign investment into the UK. “We can’t go down the Danone route,” Mr Hammond said at a cabinet meeting last October, referring to action taken by the French government a decade ago that appeared to be intended to prevent a takeover of the yoghurt maker Danone.
While Mrs May wants to put the brakes on the perceived excesses of global capitalism, a defence of Unilever — the world’s fourth-largest consumer goods company by sales, with revenues last year of €52.7bn — would seem an unlikely cause.
Further detailed work will be led by Alex Chisholm, permanent secretary at the Department of Business, Energy and Industrial Strategy, and a former chief executive of the Competition and Markets Authority.
He will seek assurances from Kraft Heinz on its headquarters, listing and employment strategy in the UK, although government officials say the takeover approach is at an early stage and it is far from clear that the deal will go ahead.
Nonetheless, the weakness of the pound since the EU referendum, as well as the prospect of new tariffs once Brexit has been completed, make the future of UK manufacturing politically sensitive, given the unpredictable effect on British jobs.
Last week Tim Farron, the Liberal Democrat party leader, said of the Unilever approach: “This deal would not be happening without Brexit. The government’s industrial strategy has been completely undermined by its determination to leave the single market.”
Former business secretary Vince Cable called the Heinz Kraft bid “really alarming”, adding that it presented the government with a dilemma. “Either they sit back and say Britain is open for business, which is a bit pathetic,” he said. “Or they try to fight it, which is what I would have done.”
Mr Cable said there were mechanisms that the government could use to prevent any deal against the national interest — noting that a potential purchase of Unilever was “even bigger than Pfizer-AstraZeneca in terms of scope, and we managed to see that one off”.
After Pfizer’s £69.4bn approach for AstraZeneca in 2014 the government sought assurances on future R&D work in the UK and the bid was eventually dropped. Mr Cable said at the time that new powers were needed to make sure promises were honoured.