Unilever Justifies Rejecting Kraft Heinz Offer by Selling off Flora and Stork to Operate Independently.

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The Anglo- Dutch Conglomerate Unilever has been going through tough times during the past few months. The US rival Kraft Heinz recently offered a takeover deal of $143 billion to the Unilever which was rejected by stating that Unilever would make every attempt to use all their tools to save them from this takeover. Among the strategic decision to stay independent, Unilever decided to sell the Flora to stork spread business. Flora to Stork business has been in losses for past many quarters due to decline in sales.

In February, after the news of takeover was released in the stock market, share prices of this giant fell down by 8 percent, making it the worse day for the company since the economic crisis of 2008. One more reason for the deal to be weaken from the Kraft Heinz side wwas that the news of take over was leaked before the company was completely ready for the take over which gave them very less time to win the confidence of the long term share holders.

Good news for the shareholders of the UK’s biggest blue chip company is that the company has also decided to raise the dividend by 12 percent and to spend $5.3 billion to buy back shares. According to the speculations made by the analysts, Unilever is expected to split in to two parts. Chief operating officer Paul Polman said all the events happened in month of February have triggered the strategic decisions of selling the margarine business areas. Unilever is a big brand which consist of Axe/Lynx, Blue Band, Dove and many more under its name.

The Dutch CEO Paul Polman confirmed that the buy back of $ 5.3 billlion shares and 12 percent dividend was a strategic decision to pacify the angry shareholders over their decision to reject the US rival Kraft Heinz offer. The bidding done by the Kraft Heinz group was an alarm for the Anglo-Dutch company to execute massive decisions to keep the shareholders happy without damaging the margins on the company. The company has a target toimprov teir margins by 20 percent by the end of 2020 inoder to regain the trust of their shareholders and hold their independent position in the market.

Currently Unilever is counting on the sale of their margarine business which is expected to generate $6 billion for the company. However, it would be interesting to see how beneficial these strategic decisions would be for the company and produce desired results.

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