By Alan Murray and Geoffrey Smith
February 22, 2017

Good morning.

Lots of reaction yesterday to my post saying that Kraft Heinz and Unilever represent the collision of two very different models of capitalism.

Jacob took on the notion that the cost-cutting fervor of Kraft Heinz’s private equity owners, 3-G, represents a “short-term” approach. “Look at how long they have held their investments,” he said. “They never sell anything.”

But while they may not sell, others noted their model forces them to voraciously buy, since the cost-cutting kills off investment and organic growth. “3G Capital has proven time and again its success at delivering dramatic cost synergies from mega CPG mergers,” says Mike Elmgreen. But the “draconian savings have led to soft top-line growth” forcing 3G to continually search for new acquisitions to fuel its growth “once the initial savings of a merger have been recognized.”

That’s a business model some folks want no part of. “Unilever is a jewel of a company in so many ways” even if recent shareholder returns is not necessarily one of them, writes Frank Thomas. Under the merger, its “amazingly unique and successful ‘sustainable life policies and plans’ would have ended up in the garbage bin.” And Rickey Ostgulen suggests that instead of holding Unilever’s Polman to a stock price standard, “why not hold Kraft Heinz to a ‘social value’ metric?”

Marcelo rejects that notion, and the whole “clash narrative” as “baloney.” “Shareholders decided, not management or culture,”he said. “The premium wasn’t big enough for shareholders to speak up.”

Finally, Sven, a Unilever fan, notes that Fortune presaged the showdown with its Kraft Heinz cover story in January and its Polman story last week. “Pure coincidence?” he asks. “Or great journalism?” We’ll take the latter, thank you very much.

By the way, one blow back from the brief-lived merger attempt may be a move in the U.K. to tighten takeover rules.

More news below.

Alan Murray


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