The culture war between short-term profit maximisation and long-term societal value creation has only just started
Ron Soonieus, Managing Partner of Camunico and Executive-in-Residence at the INSEAD Social Innovation Centre
Amsterdam,
10
April
2017
|
12:33
Europe/Amsterdam

IN THE MEDIA - Unilever fights off Kraft Heinz

Was this a battle of short-termism vs. long-termism?

Now the dust has settled, it is time for a recap of the Kraft Heinz - Unilever case, a case that turned out to be a battle of short- versus long-term according to some. Kraft presented a multi-billion dollar offer to Unilever, with the intention to take over the company. This would have been the biggest merger since the British wireless provider Vodafone's $183 billion acquisition on Mannesmann of Germany in the year 2000. Unilever rejected the offer, as it sees no financial or strategic merit for their stakeholders. 

Although Warren Buffet said in an interview with CNBC's Squawk Box that the takeover attempt was in no way meant as hostile, the case was described as a battle and might reflect a bigger issue.

Does Kraft Heinz’s failure say something about the zeitgeist? Are we moving into an era where a focus on creating sustainable value for all stakeholders and for our environment is considered a more desirable approach than a focus on short-term profit maximisation? Ron Soonieus of the INSEAD Social Innovation Centre says that this attempt is but one skirmish in a long battle, and it is far from clear whether it is the Unilever or the Kraft Heinz-business model that will be successful in the long run, in this article.

 

The Financial Times states that the Kraft Heinz type of investors have come to epitomise the “citizens of nowhere”-style of capitalism that has helped trigger populist revolts across the globe, in this article. And while their desire, if not desperation, for conquest has not abated, it struck a discordant note at this moment in history.

Kraft Heinz, one month after the merger attempt, is investing $200 million in an expanded corporate social responsibility program that includes a pledge to fight malnutrition and decrease its environmental footprint. The announcement wasn’t prompted by backlash to the Unilever approach, according to Chief Executive Officer Bernardo Hees.The corporate responsibility program has “been embedded into our company vision since Day One and is unrelated to any transaction,”said Hees.

Also striking is that the majority of its shareholders thinks Unilever should have negotiated with Kraft before saying no so firmly, according to a survey.

Dutch Pension Fund-investors have spoken out about the issue, urging Unilever to stay on course, and keep their long-term focus. As far as they are concerned, creating shareholder value and having a long-term horizon not necessarily bite each other.

And finally, for those who want to design a Kraft Heinz takeover, FT has a D-I-Y mergers & acquisitions calculator, showing the impact of different hypothetical mergers & acquisitions.

 

If you have something to add to this discussion or found an interesting article, please let us know: editor@shiftto.org