No Cornetto for Kraft Heinz as takeover hits a Wall(s)

Monday, 20 February: The FTSE 100 opened higher as it was lifted by RBS and a clutch of mining & engineering stocks before slipping to close -0.10% with the failed Unilever takeover bid and stock specific news weighing on the index.

RBS(+4.90%) led the FTSE 100 and banking stocks higher for most of the day after its announcement at the weekend that its plans to dispose of its long-held Williams & Glyn branches had failed. The attempted disposal was something of a roadblock on the road back to dividend payments and the U.K. government’s sale of its stake in the bank.  An analyst noted that on the face of it this was good news, but now strategy has changed and additional capital will have to be expended in order to re-integrate Williams & Glyn back into the group.

Manufacturing data for the U.K. highlighted orders for the industry hit a two-year high in February, as sterling’s post-Brexit slump continued to drive overseas demand. However, data also illustrated that British manufacturers expect to sharply raise their selling prices over the next three months, as the weakened currency pushed input costs comparatively higher. The Confederation of British Industry, said its monthly survey of sentiment in the manufacturing sector showed that orders stood at +8 in February, the highest reading since February 2015. Selling price expectations for the next quarter rose to +32, the highest reading since April 2011, from +28 the previous month.

Unilever(-7.60%) was one of the larger fallers in London today, as a potential takeover bid proved to be short-lived with Kraft Heinz giving up its acquisition attempt. The merger would have created the world’s largest food company by market capitalisation, leapfrogging Switzerland’s Nestle. Unilever shares were 13% higher on Friday as the takeover attempt was confirmed. The threat of political intervention seems to have de-railed the merger, as PM Theresa May looks to preserve UK jobs, whilst tough Dutch laws regarding takeovers and stakeholders also looked likely to mire the takeover in bureaucracy.

There was further evidence today that companies are buying into UK plc at a discount courtesy of a devaluation in sterling, as Amazon announced that it will add 5,000 new jobs in the UK this year. The firm is seeking software developers and warehouse staff for the head office in London, a customer service centre in Edinburgh and three new warehouses. This recruitment drive will take Amazon’s total workforce in the UK to 24,000.

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