Decline but negotiations continue between two Food Industry giants. Unilever rebuffing merger proposal from kraft heinz in what would be one of the biggest deals ever. Plus stocks pull back. Was the record run for the dow and u. S. Markets overly bullish . And four weeks since taking the oath of office, President Trump tries to focus on jobs and manufacturing. Hell visit a boeing plant in South Carolina later this morning. First up though, kraft heinz looking to create a consumer powerhouse confirming it has made a takeover proposal to unilever. The initial proposals been rejected unilever saying it undervalues the company. But kraft says it looks forward to reaching an agreement with unilever, adds of course theres no guarantee one will be reached. We finally have some numbers to work with, david, and im sure you got so color behind that. Yeah, luckily able to speak to some people who, you know, at least are familiar with whats going on here. Why are we learning about this . Well, stock started moving in the uk where if you follow at all they have very stringent rules in the uk Takeover Panel in terms of if there is something actually going on thats material involving a company and its stock has moved a certain amount. Youre obligated to come out and say something. And so we did see that initial statement from kraft heinz. And then not too long ago we got a much more specific statement from unilever describing in some detail the offer. What i can tell you at this point is the conversation that took place between the two companies was very recent. Perhaps only last couple of weeks. And of course the proposal was made. Here it is, would value unilever at 143 billion. They said 50, thats u. S. 30. 23 in cash. Tough to pull a deal like that off when youre exchanging u. S. Shares for an International Share base. That can be problematic sometimes. Theres another problem there, 18 premium. And ill get to that in a minute. And then youve got uk takeover law that seems to be the key here. And i say seems to because of course unilever is an anglo dutch company. Everybody ive spoken to expects that uk takeover law will take precedence here, but i do want to at least leave the caveat out there for more reporting to be done on whether or not you could somehow find them seeking defense in dutch takeover law and hear me starting to say the word stikting again. I doubt it. That doesnt seem to be the expectation, but i want to put that out there nonetheless. The question of course will be what does unilever think. And when it comes to 18 premium, well, what i think youre going to hear is more or less the following, that is a food multiple they want to pay for what really is a innovative packaged Goods Company. Only about 38 of the ebitda that is produced from unilever comes from food. You can look at some of the brands there that were talking about. When it comes to food, breyers, lipton. Ben jerrys. Ben jerrys. Sara, you know the other side of the business is the one thats growing more quickly. So in their defense unilever may say things as such as why would we want to be owned by or be part of a company, remember a lot of this will be shares so unilever shareholders will be owning a decent amount of the combined company, by a company that is going to be focused on cost cutting when our business depends on innovation. Now, that doesnt mean that they can just say no. Because under uk takeover law they got 28 days, as we said march 17th, to make a formal offer. That is kraft heinz does. And then it will be up to shareholders based on the timelines specifically set out under again the uk Takeover Code as to whether they want to stake it or not. You will get a recommendation from the board, but you will also get shareholders in the ability to make up their own mind. There are some though, sara, who believe that kraft heinz is real ambition here perhaps is much more focused on the food part of the business. Is there a way you could figure out a way to separate that out, would that perhaps take you down that road towards a separation and you still get an enormous business that you can add to your strategy that youve been following. Right. Which as we know involves cutting costs, involves active m a almost every year. Remember first it was kraft, then it was heinz. Now of course theyre going after even bigger product. And youre talking about 3g potentially financed by Warren Buffett here because this would be a massive deal. Do we know anything about that piece . Well, yesterday i was reporting on the fact that 3g was focused on a new vertical and the money they had recently raised for a new fund was not necessarily something they would be throwing in behind or with kraft heinz. So its not clear to me at all that you can assume there would be 3g, their Management Team is the one at kraft heinz, but kraft heinz is a public company. Obviously controlled by them and buffett has a significant stake as well through the preferred, i think that he took. But you cant make that assumption. It would be though, michael, incredibly highly levered. Yeah. Were talking about enormous debt load that would be needed to pull this off given the cash component which is fairly significant. Close to 90 billion just on the offer thats out there now which unilever said is insufficient. So that obviously is a tremendous amount of incremental debt if of course you dont get some other backer. Just a few things here about the industry because you know i covered these companies. First of all, i think it comes a little as a surprise that unilever is the target here. And i think you can see that in the reaction of shares of mondelez this morning. The oreo maker, which is getting slammed. That was considered the number one target ahead of today for the next potential kraft heinz 3g deal. It has the international exposure. So does unilever. Yes. Unilever also has Consumer Products arm, ax exdeodorant. Last year paid more than 1 billion to get shave club. Qtips, who knew . Yeah. Theyre also heavily exposed to emerging markets like mondelez i would say for unilever almost 60 of sales come from the emerging markets world. They have 168,000 people who work for unilever. And i think thats going to be another question when it comes to the culture fit here. 3g, known for its cost cuts includes cuts of employees. Without a doubt. Its hard to tabulate how much thats been. I went back and did a search for it. Kraft heinz laid off about 200 workers including in chicago last year. Year before 2,500 jobs had been cut. And theyre always of course we know zero base budgeting what they refer to now as zbb rules the day when it comes to a 3g run company or kraft heinz in particular where every year you go in making no assumptions about what your costs were last year but simply saying where are we this year. And so that does result oftentimes in head count reduction. Something else thats interesting here of course is this would be a foreign acquisition. And so wouldnt really seem to be tangled up in whats going to happen with tax reform here in the u. S. Not as crucial an item as you would expect it to be for a deal of this size and magnitude were it for a u. S. Company. The british pound presuming we have to presume theyre not going to redomicile out there. This is not intended, necessarily, as an inversion, presumably. No, i dont believe it is. I mean, of course kraft heinz think about the ownership and who actually controls the company even though where its domiciled, it gets to be somewhat complex. Chicago based company with brazilians in charge. Correct. By the way, sara, in addition to mondelez its interesting to see indicated lower some of the other Food Companies. Is General Mills lower also . General mills, kellogg, perhaps campbell. So you kind of have this little bit of an exposure of where there was a shadow 3g bid in a lot of these stock i will tell you one similarity between the Food Companies and Consumer HouseholdProducts CompaniesLike Unilever and p g, theres one common theme and slower top line growth. These companies have all struggled to grow after the recession. Theyve all been in cost cutting mode. Its one reason, david, why youve seen maybe potentially trian taking a stake recently in proctor gamble. I mean these are all companies that have struggled to get their groove back as emerging markets have slowed down. That was the source of growth for so long for proctor and for unilever. One question here of course will be if in fact kraft heinz is chooses not to go forward with the formal offer or is unsuccessful, where else would they turn . And or would unilever of course consider being aggressive on its own to also be defensive . In other words, would unilever make an approach to another company . And, sara, there were no shortage of rumors some time back that unilever had interest in colgate , for example. You never know how this is all going to go. This is all speculation at this point. There had been some speculation that perhaps 3g and we dont know what the next vertical there is going to be or whether theres going to be some alliance here between them and kraft heinz in terms of how they approach, and i got to find out more about this so hopefully i will, unilever. But, you know, you can play a lot of different games here. And some even would say, well, maybe theyre just trying to actually get mondelezs price down so they can circle back. Who knows. I doubt that. Thats not typically the way these things play out. Again, its only been a couple of weeks, really. Very recent approach. Things seem to leak quickly, carl, in the uk. That is known. Its just a different environment in terms of the way people treat secrets. Bloomberg had an item this morning call trading on the 15th highest since 2011. So obviously this was on someones radar. And thats by the way good time to mention beckys going to talk to buffett on the 27th. This will obviously be one of the many topics she covers with w. B. And to saras point on top line growth, we got Revenue Misses from vf corp. Today. Talked about the General Mills warning, so that continues to be challenged across consumer based industries. And guess what, weve got the mondelez ceo on tuesday. Theres a big consumer conference and theres going to be a lot of news there. And were going to sit down exclusively with irene rosen feld. The stock this morning last i checked down nearly 6 in the premarket on the idea that 3g heinz might be looking somewhere else in fact they are at unilever. When we come back well look at this record setting week in the markets and the road ahead. Its been four weeks in the white house for the president as he gets ready to go to boeing in north charleston, South Carolina today. Talk about jobs and manufacturing. Take another look at the premarket down after six days in a row of concurrent intraday highs for all the major indices. First time since 1987. Were back in a moment. We have a question about your brokerage fees. Fees . What did you have in mind . I dont know. 6. 95 per trade . Uhhh and i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 6. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Busy morning. U. S. Equity futures are moving lower here as we get ready to cap another historic week on wall street. The dow coming off another record high, that is the sixth in a row. Its now up 12. 5 since the close on election day. For more were joined by alan ruskin of Deutsche Bank and peter, canter fitzgerald chief market strategist. Alan, we were just talking about the potential for a kraft heinz unilever deal. Massive Foreign Exchange trade here because you potentially have a u. S. Company buying a British Company in one of the biggest deals ever 143 billion. Deals like that move the markets, dont they . Its sizable certainly. Ive seen cash components not nearly as large so its not going to be as influential as that. Its not as obvious whether its a transaction dollars into sterling or dollars into euros as well. That being said, i mean, the euros have the foreign account surplus on its side. Little direct Foreign Investment flow creates a little resistance. A lot of people questioning the euro in general, nice to have something on the side. The Bigger Picture here is we have a very strong dollar. I wonder if youre going to see more Companies Put that to work. Yeah. Its plausible. I think, you know, people forget that the valuation aspects work in ways in which people, you know, think in terms of, look, we dont want to necessarily buy u. S. Assets but equally u. S. Companies are buying foreign assets. And this is one good example. Peter, talking deal news, megadeals potential, nothing happening here, but it does sort of remind you that corporations are making moves whether its political or not in this kind of environment. What do you expect in terms of deal activity and how much of a Market Driver is that going to be . Well, i think, you know, i think companies they transact when they see opportunities strategic to their businesses rather than because of a strong or a weak dollar. Our view is that the dollar will remain relatively strong this year. We look at things like the schatz twoyear treasury rate differential. Right now it implies that we think the dollars a little weaker than it ought to be. But again, i dont think thats what effect deal activities. Companies make those sorts of decisions based a lot more on what they think is strategically in the best interest of their businesses. Peter though, one part of the broader context of course which would help out this kind of deal making is just how accommodating the bond market is right now both with rates staying contained and just tremendous demand for corporate debt. In fact, you could argue that the stock market has mostly been kind of following the strength in credit. Yeah. I think thats generally that is generally true. I mean obviously credit markets provide the underpinnings for the equity markets. And as you can put more leverage on companies that implies by definition higher equity market valuations. So i think obviously the credit market has provided tremendous underpinnings. And in fact whats interesting is the other the reason for that is something that people really havent focused much on, which is that even though the fed has been far less accommodative, global Central Banks globally have been tremendously accommodative in the fed. Theres been 2 trillion of liquidity just under 2 trillion of liquidity injected in 2016 alone, and just since december of 2016 global Central Banks exfed have injected another 400 billion of liquidity. And that is what has suppressed volatility and that has what has controlled credit spreads visa vis benchmark rates. We think that continues because we think the ecb in particular continues to act on the long end of the german curve. I mean i think we learned today, alan, that the fed is no longer the main Market Driver. Yesterdays philly fed index going up to the highest since 1984, the dollar sells off, treasury yields go down even though higher prospects of the fed raising Interest Rates. Yeah. Im a little surprised at the market response, to be honest. I think over time lets see if its actually accurate. I think the markets probably underpricing the risks in terms of either the march date, the may date or june date really in terms of potential fed rate hike. Or is it a sign that just waiting for signals out of washington . On the fiscal side. Absolutely. Im glad you flagged that really. Theres a variety of different elements going on. I think theres some elements of fading of the trump trade that youre seeing. But i think certainly in the Foreign Exchange markets where recipients are really an equity market thats very strong, very benign bond market actually carries very much, you know, the story of this year so far. When you say when you mention the reflation trade, you mean the policy, not the trade . Because the trades been there all week long, right . Right. No, absolutely. And i think arent just a u. S. Story, its a global reflation story thats going on. Global indicators are looking good. Actually, there are some risks there. Counter to maybe what peter is saying whereby youve got both inflation risks, youve got Central Banks who i think for example the ecb could be tapering in which that case you have bond yields could be backing up further. This benign environment might not last really. Well see what happens. Thank you, alan, for joining us onset. And peter ceccini, nice to see you as well. Thank you. When we come back, at t upping the ante in the wireless wars when it comes to unlimited data plans. And tuesday, we mentioned we have an exclusive with mondelez ceo irene rosenfeld, stock on the move lower after news that kraft heinz wants to combine with unilever. Youll hear her take on that and a whole lot more. Much more squawk on the street straight from the nyse straight ahead. With this level of engineering. Its a performance machine. With this degree of intelligence. Its a supercomputer. With this grade of protection. Its a fortress. And with this standard of luxury. Its an oasis. The 2017 eclass. Its everything you need it to be. And more. Lease the e300 for 549 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Hey nicole. Hey i just wanted to thank your support team for walking me through my First Options trade. We only do it for everyone gary. Well, i feel pretty smart. Well, were all about educating people on options strategies. 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