DALLAS/LONDON • Unilever is showing the wisdom of snubbing Kraft Heinz's recipe. The Dutch maker of Ben & Jerry's ice cream rejected a US$143 billion (S$196.5 billion) merger offer from its US rival in February last year.
Now it is the faster growing of the two, and its acquisition strategy appears to be paying off. Had Unilever accepted a merger offer two years ago, shareholders would be 15 per cent worse off today.
Unilever chief executive Paul Polman likened Kraft's bid for the company he runs to barbarians appearing at the gates - perhaps a sly dig at the unhealthy foods peddled by the US$72 billion maker of Velveeta cheese.
Mr Polman then kicked off an overhaul, choosing the Netherlands as Unilever's sole headquarters and selling a slow-growing spreads division to KKR. The Magnum ice-cream maker is now leaner too. Its underlying operating margin is two percentage points higher than in 2016.
Unilever grew its revenue slightly last year, but Kraft's top line is actually declining. Its headline innovations include the underwhelming decision to launch Heinz-brand mayonnaise - and some of its inventions take sales away from existing products. Data from Euromonitor shows it is losing market share among groups that sell table sauces, to Unilever.
Their acquisition strategies have diverged too. Unilever has been hoovering up smaller brands, which do not yet make much impact - it reckons the 24 deals it made since 2015 will add just 1 per cent to the company's top line by next year. But Unilever's return on invested capital of 22 per cent, according to Eikon data, clocks in much higher than Kraft's, at less than 8 per cent last year.
Unilever's stock has risen roughly 30 per cent since Kraft's offer last February, whereas Kraft's shares have fallen almost as much. Had Unilever traded in its stock for US$86 billion in cash and roughly 34 per cent of the combined company, as Kraft proposed, it would now be worth around US$140 billion - some US$25 billion less than its closing value on Thursday.
Unilever's return on invested capital, according to Eikon data, which is much higher than Kraft's, at less than 8 per cent last year.
Both companies have moved on since that failed deal. Kraft still has scope for acquisitions where it can cut shared costs, say, with Campbell Soup. But as well as being the one that got away, Unilever is also the one to beat.