March 18 (Reuters) – Unilever and Kraft Heinz had recently held talks over a potential merger of parts of their food businesses, the Financial Times reported on Wednesday, as the consumer goods companies grapple with weaker demand for packaged foods amid economic uncertainty.
But the discussions, which involved combining Unilever’s food division with Kraft Heinz’s condiments business, have since ended, the FT said, citing people familiar with the matter.
A deal could have created a new entity worth tens of billions of dollars, bringing brands such as Hellmann’s mayonnaise and Heinz ketchup under one roof.
Unilever is now weighing a broader separation of ​its food assets, Bloomberg News reported on Tuesday, citing people familiar with the matter. Its shares closed 3.5% lower on Wednesday on investor concerns that the consumer goods gaint would get “distracted” by a potential spinoff.
Both Unilever and Kraft Heinz declined to comment to Reuters.
Kraft Heinz had in February halted efforts to split the company, as the new CEO Steve Cahillane said was necessary due to deteriorating conditions in the food industry.
The packaged-foods maker, whose shares were down nearly 4% in extended trading, has been struggling since its merger engineered by Warren Buffett and 3G Capital.Â
The talks with Unilever occurred before the U.S. group decided in February to drop plans for a break-up and instead invest $600 million in a turnaround under CEO Steve Cahillane, who took charge in January, the FT report said.
The proposed split would have separated its slower-growth grocery staples — including Oscar Mayer and Lunchables meal kits— from its sauces and spreads business that houses Heinz ketchup and Philadelphia cheese, the report said.
(Reporting by Kanjyik Ghosh in Barcelona, Sanskriti Shekhar in Bangalore. Editing by Jane Merriman)
