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Expand chart
Data: Yahoo! Finance; Chart: Harry Stevens/Axios

It was as bold and audacious as takeover bids get: In February 2017, Kraft Heinz bid $143 billion to buy Unilever in a cash-and-stock offer valued at $50 per share.

By the numbers: Kraft Heinz itself was only valued at $106 billion at the time, but it managed to put together a bid of 0.222 of its own shares, which were valued at more than $80 each, as well as $30.23 in cash, for each Unilever share.

  • The offer, which valued Unilever at an 18% premium to where it had been trading in a Brexit-depressed market, was greeted ecstatically by traders, who bid up stock in both companies as a result. But it was summarily rejected by Unilever, and Kraft formally withdrew its offer just three days later.

With the benefit of hindsight, Unilever was unambiguously correct to reject the Kraft Heinz bid.

  • Unilever stock continued to rise even after the bid was withdrawn, and the company has been worth significantly more than the $50 per share offer price for nearly all of the past two years. The company is today worth about $150 billion.
  • Meanwhile, Kraft Heinz shares have imploded to less than $35, giving the company a valuation of just $43 billion. If Unilever shareholders had found themselves owning 0.222 Kraft shares instead, they would have been very unhappy — not to mention the fact that they would have had to be making interest payments on a massively enlarged debt stock.

Kraft Heinz is operated by 3G Capital, a Brazilian company notorious for its cost-cutting. The company's playbook worked well, until it didn't. Profits go up in the short term when you cut costs, but 3G is very bad at investing in future growth. Instead, it tends to grow via acquisition, and that turns out to be hard when no one wants to be bought by you.

The bottom line: Cutting costs does nothing to improve brand value, as Unilever knew in 2017 and as Kraft Heinz has now discovered. Once brand value has been eroded (to the tune of roughly $15 billion, in the case of Kraft Heinz), it's extremely hard to recover.

Go deeper: Kraft Heinz stock implodes on gruesome earnings

Go deeper

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Olympics dashboard

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🎾: Athlete spotlight - Naomi Osaka looks to snag gold on home soil

👻: How the no-spectator Olympics could affect the athletes

🇺🇸: "What an honor it is to watch you soar," first lady tells U.S. Olympians

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2 hours ago - Sports

China wins 1st gold of Tokyo Olympics

Silver medalist Anastasiia Galashina of Russia, gold medalist Yang Qian of China and bronze medalist Nina Christen of Switzerland celebrate on the podium after the 10m air rifle women's final. Photo:

China's Yang Qian won the first gold of the Tokyo Olympics, narrowly beating Anastasiia Galashina of the Russian Olympic Committee in the women's 10-meter air rifle final.

Why it matters: The first medal ceremony of the Games took on extra meaning after a year-long delay and other hurdles brought on by the pandemic. Athletes are required to hang medals around their own necks in an effort to prevent the spread of the coronavirus.

Journalism's two Americas

Illustration: Shoshana Gordon/Axios

There's a sharp divide in American journalism between haves and have-nots. While national journalists covering tech and politics on the coasts reap the benefits of booming businesses and book deals, local media organizations, primarily newspapers, continue to shrink.

Why it matters: The disparate fortunes skew what gets covered, elevating big national political stories at the expense of local, community-focused news.

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