Yield, no, we dont have negative rates the way they do in some places in this world, which still is an amazing thing but you dont get a lot when you loan your money to the u. S. Government for ten years 1. 863. The road map, megamerger kraft and heinz agreeing to merge with the help of Warren Buffett and most importantly 3g capital creating what will be the worlds fifth largest food and Beverage Company. I think Third Largest theyre saying in terms of Food Services or food products. Plus, dow futures pointing to a flat open this morning after an unexpected drop in durable goods for the sixth month in a row. Shares of merck, up in the premarket. Drugmaker announced it will increase its share of buyback by a significant amount this after good results yesterday on a potential melanoma treatment had the stock up. Start off with of course the heinz kraft deal. Unexpected deal structure, perhaps, for a name that has been rumored a bit. That is that heinz 3g Warren Buffett, are essentially taking control of kraft in a very large deal which kraft holders will get 16. 50 a share in a special dividend that coming in the form of 10 billion being contributed by both 3g and Warren Buffett. Im told more or less equally. Assume roughly 5 billion each that will go directly to graft shareholders and then a new company in which buffett and 3g or heinz if you will they control heinz will own 51 of the combination, while kraft shareholders continue to own 49 . So if youre kraft shareholder you get 16. 50, a new share of the new company, a combination of what youre looking at there, all of the different brands jim, that come together as i said, to create the Third Largest food and Beverage Company in north america. As we said the fifth largest in the world. Philadelphia, all of the things of course, not to mention kraft, not that long ago, split off from mondelez. In this case heinz gets or kraft gets international again. Right. Which is something apparently it wanted which it had with mondelez. But a very interesting deal in which kraft has made a decision to effectively give up control of the company, change in control, as we say in m a parlance you get a premium for that. They are getting 16. 50 a share dividend for shareholders which represents nice percentage 27 of the overall stock price, higher margins, synergies of 1. 5 billion realized at the end of 2017. And we are going to now be run by the 3g guys jim, who are lotted for their ability to take costs out of businesses while at the same time seemingly maintaining or increasing their growth trajectory. I sometimes wonder when you hear so often about these companies, these operators being lauded but in conversations ive had with the kraft team so to speak, they spent most of their time doing Due Diligence whether 3g delivers what they say they do. Thats why i think when the stock United Stateswas up 15 i thought it was ridiculously too low. First of all, these are brand that carry much better internationally than domestic. Domestic, these are pantry brands. Youre not going to see these brands in whole foods. Developing countries are well behind us in terms of natural and organic. These will well. Ive been recommending kraft as takeover candidate, kraftheinz reinvents itself maybe buying whitewave, maybe buying hane, becoming more natural organic, less pantry. Kraft was being eviscerated at every level, whether white wave coming in with horizon lunchables or plantbased foods taking the place of their Beverage Business. Hanes stacks taking the place of snacks. Whether Hampton Creek and mayonnaise, this was simply one of those dying companies rei invigorated going to where many countries, frankly, are not as interested in health. The same countries that still drink cocacola. Its a brilliant move by all involved. Interesting you bring that up. Warren buffett was earlier on squawk box on the phone. He joined them of course. He will remain on the board. Hes now one of the group that will control the combination of kraft and heinz. Remember, it was the heinz deal that was done back in february of 2013 when he contributed a great deal of money, along with 3g, to take heinz private. Brilliant. Interesting part of this i dont have at answer what is the value of their investment in heinz because of course you have to make an assumption about what heinz is worth to figure out what your deal is going to be. I think it could be a multiple two or three time. Moving target. Heinzs ebitda from 2 billion to 3 billion over the last three years, thats a 50 increase. Heinz did not have real growth. They had that growth that some would say manufactured which is that you buy back a lot of stock, you dont have organic growth. Now apparently they are taking market share and seeing a bit of top line growth. Right. Heinz had a much more unassailable brand. There is no the going to be another company that has ketchup on the table with heinz. Youre not going to see chinese ketchup, no real rivals. Thats not the case with kraft where there are kraft salad dressing under attack from bold house, owned by campbells. You can tick down everything. Remember you take a brand like velveeta, other than if you go to ginos in philadelphia. I think honestly soil and green is greener than velveeta. On that subject, we did ask mr. Buffett about this whole idea of kraft versus organic. The taste of that kraft and heinz, for that matter, have appealed over many many decadeser heinz go back to 1869. I think those tastes are pretty enduring. There will be plenty of people that want to eat other things but there will be plenty of people that want to eat the products that kraft heinz churns out. And new products come out all of the time. At heinz we have four new products that will be hitting the shelves with this year. So it not a static operation at all. And weve got a management that im moving to bet a lot of money on. Yes he has been betting a lot of money. On this idea of buying another company, certainly they want to own businesses in perpetuity. Right. That is expected to be the case. Not just mr. Buffett for berkshire but more importantly 3g people who run these companies. But they will do another deal although im told its going to be a while. A very Large Corporation that they are merging with. And it will take quite a while to realize all of the synergies and deal with all of the cost cuts apparently that theyre going to. The zero base analysis that they do every year at 3g with their company. Some say were zero basing. Hps doing that as they do the split. Mondelez with reid rosenfeld, they do it once costs rise again. They do it every single year. When i recommended it as a breakup play i thought was well in excess where it was a year ago and thats because you can sell off a lot of the brands. Lets go over some of the brands. General mills bought annies. Why . In order to attack craft mac and cheese. Why did horizon decide to brand its own version of lunchables that looks like oscar meyer . People want natural and organic. Look at the assault this company was under and then you look at the heinz management and they can say, we dont want to be in the cheese whiz and jello business we can sell them. We dont need to be in the coffee business, we can sell that. Assets are worth to other companies that want further place in the supermarket. These guys are in the center of the store, center of the store is losing a lot of share. Go to kroger to see what its like to understand the assault that kraft was under. And i think this is a brilliant move if youre kraft because i didnt see growth. They did put a new ceo in who i think was devoting himself to exactly what were talking about here. Now my understanding is when he was approached by 3g and mr. Buffett, warren said it took four weeks, im told it was early in the year when the first approach was made mr. Cahill, im talking about, just appointed ceo a few months ago, he took to 3g guys alex bearing whose runs heinz, he took to him and liked what he was saying because he was going to be following a similar plan. Cahill will stay at the company in the sort of chairman operational i want to put the right name on it i forget what exactly it is overseeing some of the stuff. They were going down a road he said he was willing to go down as well, namely we need to cut, we need to focus on getting our margins up. Sure. When i hear these guys talk about how these companies have so much to cut, and that heinz, though nelson peltz was on the board for years had more to cut, you have to zero base every year and only 3g guys could get the cuts out of the companies that apparently have been well run, what does it same . The companies are trying to make it so brand extensions work. Maybe chipotle mayo. They have research and development. You know what this is . This is valeant, just wants you to use a completely different model, its valeant coming in and saying we can slice r d, make more money, we know how to do it youre spending a fortune trying to reinvent lunchables forget about. In the meantime heinz funnel heinz was the most international of the domesticbased companies. We forget how much of the business was overseas. Look how you can run these things through the pipe. You know what . Brands that may mean to our parents something or Warren Buffett something, maxwell house, it may resonate in other places. Kraft singles may resonate. Much more than they do here. Youve got the heinz International Pipeline youve got all of this r d and working for kraft, these are companies not like goldman sachs. You do not go and expect if your division is down to get fired. Im sure people who work at the, well, lets go there, the oscar meyer and mir kaacle whip i bet you those are life time jobs. They are very comfortable owning large, controlled stakes in large, public companies, for example, anheuserbusch of course, a significant ownership stake and dont forget burger king which they told to sim horton. Fabulous successes. They own a great deal of that company as well. Now, another one. Sara eisen, shes been listening on the Conference Call. What are we hearing so far. An investor call going on with management. Q and a from analysts getting into accounting. I would say two points emphasized by management of kraft and heinz from 3g. Number one on the international front, emphasizing kraft does have appeal. Already its thought of as a north american penetrated brand but there is some international exposure. Management says 80 brand awareness. Obviously leverage the heinz International Platform to take kraft more international. The other within on the subject of cost cuts, talking about how theyve been successful with expanding margins on cost cuts for heinz and that they do expect to bring this combined company back to longterm historical Revenue Growth able to move faster together. Between play for you sound from alex bearing, the chairman of heinz and managing partner at 3g capital, will be the chairman of the board of the combined company. Have a listen. Combining our two businesses we create the Third Largest food and Beverage Company in north america and the fifth largest food and Beverage Company in the world. The company will enjoy significantly enhanced scales in its key north American Market not only at retail but also in the food service channel. In addition, this combination will generate substantial synergies which we currently expect to be 1. 5 billion as well as many revenue expansion opportunities, both domestically and abroad. So theres the revenue expansion, the other side of the cost cutting on on the combined company. Ceo laying out for analysts and investors some of the innovation opportunities. He mentioned jalapeno ketchup for heinz. Obviously looking at new products and looking how they can create more billion dollar brands. Weve just got video, never seen before from john cahill who is the ceo of kraft, only been on the job so far this year, announcing the deal. Lets take a look. As we focused on strengthening the business, we were approached about this deal. We immediately saw a great opportunity to execute a clearcut strategy and build on greater scale and complementary Business Models that lay a Strong Foundation for growth. We believe this transaction will acusllow us make changes to become a stronger business faster than we would be able to do on our own. Like most winning teams make its the right move at the right time. Again that was john cahill the current ceo of kraft. Hell become the vice chairman of the board of the combined company. What investors are asking themselves, what is the longterm growth plan . I would say, based on this investor call, they are emphasizing innovation and international reach, no question about it. Jpmorgan, by the way, put out the first one ive seen what the value per share would be of the combined company. 84 per share. Im looking at different numbers coming in from the various research firms. Youve got to make that assumption including 1. 5 billion in synergies, what thats worth. People have a great deal of confidence in 3gs ability to deliver on synergies or come above them. They went in to heinz with 600 million run rate synergy number. Theyre at a billion right now. When i hear what these guys have been able to do almost seems like a miracle. But then i start thinking maybe the other people were not generating the growth and not generating the markets. This is Like Unilever versus proctor. Proctor kind of didnt didnt really take over the emerging markets the way they should. Theyre fighting back now. Unileaver owned those emerging markets. Who knows emerging markets better than 3g . We dont have that mindset. I know. One thing i would say, they were mondelez and kraft were one company not long ago. What was the point if theyre getting back together with another company to get international exposure. How about Warren Buffett, he talked about these breakup to makeup to breakup. He didnt like these things. He voted with his feet remember. He did some dissing of this. At the same time look at kraft brands and i say, geez i could sell this thing in right now, i could go down to argentina and brazil and i could say, listen miracle whip thats the whip of kings all right. Coming up dish network chairman and ceo Charlie Ergen. How do you get these people. Looking to capitalize on cord cutting with its streaming service. My guest on the 10 00, live from the New York Stock Exchange. Charles william ergen, yes. A look at futures this morning there it is. We are looking for an up open more squawk on the street. More on this huge deal. And a lot of other things to cover when we return. You can find a new frontier. Theres nothing stopping you and a lot helping you. Technology thats with you always. This is our promise. Its never been better to wander because wherever you go, youll find us doing everything we can, so you can. Less than an hour from now, well be gin joined here by charles ergen, the chairman founder of dish incoming ceo as well with joe clayton leaving that job at the company. So many Different Things to talk to mr. Ergen about, jim, whether its the enormous spectrum portfolio the company has acquired and what it will do with it which continues to be one of the key questions, perhaps the one he gets most often these days. No shortage of other things in the old business mature business, whether its over the top or the sling tv offering they now have first out of the box. Something we were talking about yesterday. Look, i think that when you look at what the Biggest Disruptive force is in america today, its how we get our entertainment, whether its over the top, are the Cable Companies dinosaurs . Are the networks being footballed . Is facebook coming . The most challenged company you could argue is dish but the one with the most opportunity because all of these require spectrum, bandwidth, speed, and this mans a deal maker. Hes sat on the sidelines. Someone said hes smarter than malone. Someone asked you that. I know one thing, catbird seat seat. Hes made you a ton of money. Thats a great point. 20 average annual return since it went public in 9. I dont know if we have the chart. Same way i like to listen to Warren Buffett. Certain people who make money every day. Yep. It used to be the banks. Now its Charlie Ergen from we will be speaking to him, 45 minutes from now. Up next cramers mad dash. Well talk amex. A look at futures. More squawk on the street after this. Take a deeeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Ahhh ahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim before i knew it. Ahh so he had your back . Yep. In just one day, we approve and pay. One day pay, only from aflac. [duck snoring] can it make a dentist appointment when my teeth are ready . Can it track my crews performance, and protect their heads . Can it tell the Flight Attendant to please not wake me this time . At cognizant, we see opportunities for every company. To meet the new digital demands of their customers. Can it process my Insurance Claim . Like, right now . Can it download a track while im sampling it . Can my keys find me . 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