Transcripts For CNBC Squawk Box 20150325

Now shareholders of kraft will get that in the form of a dividend worth about 27 of the shares of kraft right now. I believe thats what it is. 16. 50 is the number we were hearing before this crossed the tape. 27 , youre right. We believe that equates to 1650 as we speak. I have props guys this morning just to show everybody sometimes you try to figure out what these deals actually mean. This is what it actually means. You have planters did you get this all out of your of course the ketchup, Everybody Knows about the ketchup, more peanuts, brought this for you joe. Beans. This is kraft. Wheres the singles. Mac and cheese. This is another piece of it. No metal in here. No metal in that. Any fake flavoring or coloring . I dont know if you remember a1. So there you have it. This is this is the merger right here on the table. We should point out kraft shares closed at at 61. 33. Theyre looking to be somewhere between 72 and 7349. If you think about what this transaction is about, this is the roll up that warren buffet has been talking about and that we have heard from 3g and what im told from people around the table is this deal is going to be sort of the basis for something that theyre going to use to buy even more stock and one of the things thats happened that weve seen over the past year and a half is the business at heinz has gotten so much better. They made that business so much better. If they can do the same thing to kraft they can buy more things. Just a perception that these companies have gotten bloated and sort of live in the past with millennials, they wouldnt be caught dead with some kraft singles after watching john stewart. They wouldnt be caught dead with that horrible mac and cheese so they need to reinvent themselves and cut costs. Heinz has been amazing at it. Is it 3g. No i thought we used 4g. Isnt that the standard now. Youre confusing industries. How can you get a descent buyout with 3g when theres 4g around. I dont know if you remember that the wall street journal said that 3i was going to buy burger king. Theres a firm in london called 3i which was not the Company Buying it. 3g bought burger king. Do you remember when warren almost weekly undercut the ceo of the combined kraft mondelez. He used to be a shareholder at kraft. See theres method to his madness all along. Hes been coveting kraft for a long time and heinz. He hinted at such. Shareholder in the annual letter he did say, this was the annual letter released two years ago my friend asked berkshire to join his 3g Capital Group in the acquisition of heinz. Goes on to praise them for this. They hold themselves in High Performance standards and are never satisfied. We expect to partner with 3g in more activities. In the journal they didnt have the story but they said they might use heinz as the vehicle to do this. So theyre doing it in some way. Who is writing the check . Do you know . We dont know. 3g has its own fund. It raised some money, private investors 5 billion including people like bill ackman as part of the fund. Kraft has struggled so the question is whether 3g will be able to do to kraft what its able to do to heinz. Pretty good brand name. Kraft heinz will be the company. The companys ceo is the ceo of kraft, he will become the vice chairman of the panecompany. Hes new. Hes a deal guy so here he is doing the deal. This company will be run by alex at 3g who runs heinz. If he started some boring Insurance Company in the 60s and all along, look he owns things that you almost think of america and you think of names like. Cocacola, ibm, but owning them out right like heinz and kraft, hes going to own everything. So heres the question. Also in the letter he said that he already has i think 9. 5 of the companies that would be listed and i always mess this up, fortune 500 or s p 500. Theres 490 left. Some day. He lived long enough he would. So when kraft spun off everyone wondered who was going to be the better deal. Mondelez was the international brand. The great irony is having its Board Meeting last night and today so im sure the conversation around that table will be interesting as well. We know who has the better name, kraft versus what is a mondelez. It was a made up word that was supposed to monde means world and i forget about the rest. It was available. I say what im hoping we can figure out today is how a shareholder of kraft would value the transaction. Its hard to know he what heinz is worth given that it is currently a privately held company. It will be called kraftheinz. I like heinzkraft. It just has a ring to it. Slides off the tongue a little bit. It does. I dont know. Joining us now is erin the senior Equity Analyst at morning star and thank you for joining us early this morning. This deal news just hitting in the last couple of minutes so we do appreciate you being here. Whats your instant reaction . I mean obviously this is a interesting transaction. You know kraft brands are obviously focused right now in the u. S. So combining with heinz provides that International Distribution platform and further kraft has been working during its time as an independent organization to cut cost and ill prove the efficiency of its organizations, something heinz has been undergoing over the last two years under the ownership of 3kbrks3g capital. You just took it up last night from 53 but you say that didnt include a premium valuation. Why did you move your own goal by 9. That was reflective of cost of capital assumptions adjusting the returns that we think investors are likely to demand overtime. So its more reflective of our weighted average cost of capital as opposed to any fundamental changes in expectations. But you did it last night. Im guessing you did it because of this particular news. We had it was pending. It just happened to be the timing. When you look around the industry, what 3g has done with heinz has shaken things up. Do you look around at other competitors and think maybe they should be valued more highly as well . Obviously theres been a lot of talk in terms of throughout the industry in terms of heinz a few years ago in terms of potential acquisition targets and other players that might make sense in this regard. From our perspective a competitor like kraft or kellogg or Campbell Soup are both undergoing turn arounds in their core business with cereal and soup and as such dont necessarily seem to fit this mold. We think that krafts portfolio was they were investing behind Product Innovation and marketing support and were starting to realize some traction in some of their efforts. How would you value this transaction this morning if youre a kraft shareholder . We understand the 1615 cash component and you effectively get one share in this newcomb biened combined company with heinz but we dont know fully all the numbers around that company. Yeah i have to work through the numbers and figure that out. I havent quite processed all of that yet at this juncture. I guess its a little difficult to try to figure out whether or not this is a good deal but based on what we have heard about some of the metrics with 3g do you think this is a good deal for shareholders. Its hard to say what its valued at right now so i cant truly comment on that. So i guess beale see as question get more details. Theres a Conference Call scheduled in a couple of hours as well so hopefully well get more insights. What do you most want to hear on the Conference Call . What are you most curious about . Theres a couple of things just in terms of the overall structure and intentions. In terms of the portfolio. In term of the brand mix. Obviously kraft continues to operate with some lackluster brands they have been unable to turn around despite several attempts to do so. So expectations in terms of the portfolio as well as expectations in the amount of o savings that they expect this deal will generate. Do you cover mondelez as well . Questions i do. Does that make them a more likely takeover target . How do they react to that . I dont know if that makes them a takeover target. Ever since they became a publicly traded company we always anticipated they would be more of the acquirer looking to build up their footprint especially expanding their business further into the snack side. Were seeing that with the pending coffee transaction that was announced last spring. Theyre looking to build up that coffee side and we think those efforts will continue. To the extent that this company, this kraftheinz combined Company Becomes a Larger Company that can do additional roll ups in your space, what would be next on the list. In terms of large deals its hard to say at this point. Prior to this deal being announced we thought kraft might look to extend its footprint either internationally and or by looking into the organic space where kraft is under penetrated. When the Management Change was announced late last year we were of the opinion that they would look to extend into faster growing segments where they didnt participate and organic seemed like a natural fit for the business. When they split i think there were some sort of noncompete issues. Do you know if those still exist . No i do not unfortunately. Okay. Erin, thank you for joining us today. I appreciate it. Thank you. I dont know any of these brands. The cadbury one i know. Thats the one they had trouble with. Creme eggs. Yeah. Chips ahoy. Dentene. These were the fast growers. Oreo. Nabisco. Nutter butter. You know all of these brands. This is real cheese. Thats a john stewart whaeteat thins. I cant tell if thats no but the first ones i didnt know. Barney. I hear the adds for it every morning. Its a breakfast bar or something because they have a soft rock commercial. Its really bad. Anyway beyond kraft here are the other big stories to watch today. Facebook holding its Developers Conference today in san francisco. Investors will be looking for announcements on things such as new apps. Mark zuckerberg will deliver the address at 1 00 p. M. Eastern. American express is holding an investor day. The ceo will tell analysts how the company planned to deliver longterm growths of 12 to 15 . A target that bail tougher after amex lost the valuable costco account. Andrew i always look for you for your take on how its going to put everybody out of business basically disrupting. Is amex going to be here in 15 years. I hope. I didnt ask i think its one of the Great Companies of our time. Paypal. What about google and payall of this stuff. Theres a lot of disruptive stuff happening. So youre tempering your come mens. No i think they made the credit card space so much better than it is today my worry is theyre under so much pressure and i dont know. I knew youd be worried. Thats why i asked you. I dont know whether the millennial generation we keep talking about i hate that word. Of which youre a part symbolically. Whether they care about to the extent that the American Express card was a status card. People wanted to put that card down on the table. I dont think millennials care about that. So the question is do the rewards and benefits and things that accompany that card does that matter to them and if that matters to them thats going to cost American Express more. Why dont you just wave your apple watch. Its possible. But the question is whether you wave your watch. Why would apple partner up with amex. Why wouldnt they just do apple pay or something. They do but that works off the back of all of these other card companies. They have not become the bank yet. The question is do they become the bank. Does paypal and the other products get in there. I dont know the answer. Im hoping thats not the case. Theyre worried. Theyre very worried. They should worry about it. If they navigate effectively through the future it will be a tough one. I want them all to succeed. Yeah. I dont want them to go out of business. I want them to succeed. Big lover of corporate america. I just like to identify the challenges ahead. Between the airlines and the Broadband Companies i can see how much you anyway and on the drug companies, banks, and on the economic front, one data point of note this morning, february durable goods is at 8 30 eastern. Forecasts are looking for the headline number to rise by. 2 . An andrew you have stocks to watch. Its kind of crazy. Lets tell you about stocks to watch this morning. Heres whats happening besides kraft but lexmark is buying kofax for about 1 billion thanks to a 47 premium. The deal will double the size of the Enterprise Software business. Also we tell you that mercks board is authorizing aeing additional Share Buy Back and then sonic posting better than expected earnings and revenue. The full year profit outlook is a bit conservative. I have not been to a sonic. No. Thats a west coast situation, right . Yeah. You know im sure its good. I could use one right now. Everybody wants a good burger. Just five trading days are left in the First Quarter and the street is already look ago head to the earnings season. Expect to have a big impact on results that would not come as a surprise to anyone though at this point. Chief Investment Officer with cmt officer. Allison ill be with you in just a second. Sean i dont know what you think about things because i dont remember and you havent been on as much as allison. So i read some of the stuff to let you want to pick and choose. Its going to be the dollar and also the fact that the overseas markets remain relatively lackluster. You see theres an enormous squeeze on asset markets. Central banks buying governments and Share Repurchases forcing the multiples up. Thats been the theme in japan and now in europe as well. So theres a limited number of assets for all of the new money to come in. Its making everyone nervous. I know youre negative on latin america and brazil specifically. How does that play into this deal today. Well the difficulty is for these countries at the moment theyre going through quite significant recessions. So these were the bricks in the sense, were the big growth engines for the last four years and now theyre going through mini recessions and the Interest Rates are are very high so the difficulty is for the overseas revenues for a lot of u. S. Companies its going to be quite difficult. You think japan and europe are probably better than the u. S. At this point. You take it at face value were entering a tightening phase. Probably something to be aware of. We think the u. S. Is a fairly mature bull market now. Growth already had five very goodyears. Europe and japan, the base effects would you sell everybody here and buy it europe and japan . You would. I probably would. Its much more companies to choose from now and in japan weve had 12 months in the first period of Share Buy Backs in 20 years. Theyre getting the Corporate Culture america had. At the very least some investors should have not all u. S. Equities. I agree with a lot of what sean said aside from totally liquidating out of u. S. Markets. People should be moving some assets overseas. Europe and japan is where they should go. Our market is fully valued. I dont see any reason to go higher. We need corporate Profit Growth to drive the markets up and for the next six months its going to be challenged. Its negative. Negative comparisons. You said down. Marginally down on year from 2014. Down. Not just less growth. But you could have a good gdp print for the year but because of the structure of the Earnings Growth so much of it 47 from overseas and the impact in the fall in Energy Prices it could be difficult. I think id trade in 3 or 3. 5 gdp growth. Corporations have been doing well for 5 or 6 years and we had no gdp growth. Id almost trade at that this point. Everybody says corporations are doing great but nobody else has. That cant go on forever until the mob shows up outside the castle. Heres the question. We think this is the year of wage growth. If corporate profits actually drop will that continue or will corporations try and reign in on all spending and that mean that the wage growth doesnt show up . Well i think were at a point is probably why the market is so volatile that either wage growth will improve, consumers will pick up spending and some of the negative trends were seeing in the first half of the year could be offset by a resurgent consumer becoming stronger and profits start to be better or corporations start looking at the fact that 40 plus of the revenues come from overseas and they not only dont wage raises but stop the momentum were seeing in hiring. So were at a cross road which is is why i think were all data driven. The best thing would be if corp. Asians didnt have a choice corporations didnt have a choice. This is what were talking about, gdp does better. I think were on the edge. Corporations never do anything because any capitalistic system it would be nice if they did things because theyre nice. They couldnt respobdnd to demand. There will be demand and theyll have to compete for good workers and wages will start going up and if the profits arent as good so be it. I would agree. The real Income Growth story is a very good one about the restaurant sales. We have been noting that numbers coming out of the Restaurant Companies are fantastic because of the falling gasoline prices. Theres some sectors that can do very well. But the way the index is constructed its not going to have as much of oan impact on the overall bottom line. Thank you. Coming up why toys r us is thinking about leaving times square. This is very sad. And then later, veteran retail analyst dana telsey will talk to us about the health of the consumer and forbes is unveiling its ranking of top tech investors and peter orszag sounds off on washington and the economy. But first heres a look back at this date in history. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. If you are just waking up this morning we is a deal. Kraft is merging with ketchup maker heinz which is owned by 3g capital and Berkshire Hathaway. And theres other details andrew is going through. The deal will be up sharply this morning. Closed 61. 43. It will open somewhere between 70 and 71. A lot have been emailing with people trying to figure out how to value it. People still dont understand what the value of heinz is. If you dont understand that component of it you cant come up with whatever you think the stock price is. But its a different structure. Its 51 is what heinz will be holding afterward. After they put 10 billion that they give as a one time dividend. Right so if your a kraft shareholder you get one share of this new combined company. Then 16. 50 in crash. Half a share. The equivalent of though im told its technically going to be one share. Lets tell you about some other headlines right before we went to break we told you that toys r us could be thinking about leaving times square. The toy giant saying the company decided not to exercise its option to renew the lease there. It runs out in 2016. This is the shop with the indoor ferris wheel. Giant dinosaur too. They are exploring alternative locations that could include somewhere else in the times square area though given the amount of physical space they have im not sure theres lots of other spaces that can accommodate a ferris wheel. Christmas eves covering stuff for cnbc. We go there and we buy ice cream and do the whole. Ride the ferris wheel. Do the whole thing. We havent ridden the ferris wheel because henry and max think its scary. Too high. Its pretty big. Its so big. How about fao schwarz is that still around. Theyre in business. They still have the piano upstairs you can play on. They charge you go to to the piano. They charge you to take a picture but you can wait in line and get on it for free. I tried to show my kids that movie and its dated. Dated. What a movie. Like the toys that they were looking at that tom hanks was, the kid designing them was like you know were in a different day and age right now. Think about how old that movie is. You just inspired an idea. Do you want us to go over and do that dance. An updated version. That would be huge. Cant be tom hanks but find your pick your new actor. All right. Wages, may not be climbing on all industries but babysitters are seeing their pay move higher according to a new National Babysitter survey from care. Com the average babysitter rate is 13. 44 an hour. Thats up from 1050 an hour back in 2009. Nearly a 30 gain and the government din get involved in this at all. Baby sitting wages reached a record high of 16. 65 in san francisco. While grand Rapids Michigan was at the lower end of the curb but still well above, 11. 31. New york city its a little higher. Yeah its got to be at least 20 an hour. I was going to say often times its 20. Potentially 25. Plus you have two kids. Unless were talking about were not talking about a High School Kid are we . It depends. Oh that is what i think were talking about. Okay. Weve had 20. Weve had the entrepreneur in here that started her own service. Young woman she was not even in high school right . No thats a good business. She was going into high school which is why she needs a ceo to run the company now. Were dealing with that now when does the child become the babysitter for the younger sibling. I remember when i became the babysitter. How old. Like 7. Thats not the case anymore. Where did you grow up . They let you be babysitter at 7 years old. Shes 7, she can watch the kids. Honey run down to the store and pick up bread for me in the truck. Seriously . Where did you grow up. I remember at 7 they went to dinner downstairs in the restaurant i staid up in the hotel room and baby sat. At 7. Things have changed a lot. We didnt used to wear seat belts in the car either. I remember that actually. The nonseat belt thing. Those were the days. Yes. Things are very different. Im getting in dangerous territory. I was going to mention a double wide or something. Im not going to. Was this oklahoma. No but that was before i was in houston then. 7. I remember we went to san antonio. You still have the same i want to talk to them. 7. Shell handle it. I give them a little grief about that. What if something happened. They were downstairs. We were in a hotel and they were just downstairs. So blake is 15. 15 i was watching all three. But then again not all 15yearolds are created. Blake is responsible and also an entrepreneur. She may charge you. Oh yeah. Thats part of the deal. Its 20 for a lost tooth. For a tooth that comes in. When i was the babysitter for my sister i wouldnt get paid. No i got paid for my brothers sometimes too. Oh. Good at extracting money from the parents. Coming up new questions about googles access to high ranking white house officials during an antitrust probe of the search apology yabt giant. But first take a look at yesterdays s p 500 winners and losers. under loud music this is the place. Their beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. There is no good lighting but if i lean forward theres shadows and shadows make them look worse. Needle in the face you know some day. Some day im going to come in here and youre going to Say Something and im going to go just like jim carrey and its not going to move because im going to have botox everywhere. So this athens thing, man, so yesterday he said this mishandled from the start. 50 50 chance they go down the drain. Theres no good outcome at this point. I read this just incredulous. Athens raids Public Health. Theyre broke. They have raided the coffers of the Public Health service and the metro. We think about the way we fund the metro here and how tenuous that is. The metro is the place with the money in greece and theyre using it to pay the salaries of government workers and theyre raiding it and they informed greeces banks that theres no longer the ceiling on tbills. Thats going to make them more cash strapped and finally my last point just in this in the wall street journal a greek surprise theyre calling it. I dont know your mind immediately goes there. I dont know what a greek surprise is. Ill look it up on urban dictionary but in this case. I dont. I just saw you look at me when i said that. This greek surprise. Not an animal house situation. Did you see will ferrell is willing to ban all fraternities. We just need to ban them all. After he made that great movie. According to the take on this they no longer fear an exit from the euro. Some think maybe you let that happen to get other people, look, this can happen to you if you dont structurally improve. Thats what we thought for awhile. If you give a better deal to greece staying in italy and spain and fort gal. Spain and ireland want to be a part of that too. If you let lemann go it lets everybody else this will be the year we find out. I dont know what an exit of greece it would certainly show that the whole euro experiment at least were still, theres going to be additional chapters written. You cant say its staying forever. You can make the case of five years from now. I think the euro will still be here in five years. I just dont know if it will have the same membership and i dont know that the construct will be the same either. It may be like the return of a mark. Where germany is sen trick. Its the french more unhappy with this deal at this point and who are complaining more than the germans are. You go to switzerland. Differ frank. Does kraft heinz. We he have a lot to talk about. Consumers are they shopping or dropping . She is Holding Court with some of the biggest names today. Were back with more in just a moment. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. Welcome back. Story in todays wall street journal talking about the ties between google and the white house during the obama administration. The paper reports the company is averaging a white house meeting a week now showing the final days of the governments antitrust investigation but they were talking a lot. Larry page met with officials to discuss settlement talks. I dont know if we think this is unusual or not. Should googles people be talking to white house officials . Theyre in the middle of the antitrust investigation. It shows you the close relationship but i would say we had Serious Problems when jamie diamond couldnt get access to talk to the government officials about things that happened. You want a back and forth negotiation but youre going to have people asking questions. One of the reasons is like the fcc case. The white house won necessarily tell the Justice Department what to do but i would say the white house can definitely tell the Justice Department what to do. Thats why you dont the precedent of making it hook so obvious that theres a lot of it. With net new tralty. With that and a lot of other things. I have no doubt that you can call someone and say ease off if you wanted to. Connections matter. Thats part of the problem. Thats why people dont know what matters. Theyre examples of the same thing and they gum up the works of the way things are supposed to work. Lets talk about the Advisory Group hosting its annual spring consumer conference in new york today. Dana joins us from there. Its good to see you this morning. Nice to see you too. Thank you very much for having me. So how are the retailers starting to shape up as we head into the spring season. Hopefully better than january and february. There are many store closures. This month of march is key. Were starting to hear of improved Product Trends out there helping to drive the business. Macys talked about the success of their line. Ulta is seeing nice increases in many of the Branded Products and tiffany coming off this spring is going to introduce a new watch collection with the ct60. Whats happened to the consumer in we know that gas price versus fallen sharply. We keep waiting for consumers to show up in droves at the stores and that doesnt seem to have been the case just yet. Do you expect that thats going to turn the corner at some point . Yes, i do think well see a pick up in Consumer Discretionary spending. I think exactly what you just said. We have been seeing more consumers spending on restaurants and spending on travel than on discretionary products. Theres been less newness. The retailers are prepared. We have seen inventory levels getting cleaner and for the first time in a couple of years were beginning to see new apparel trends whether its the look of the 1970s or bohemien or southwest french. Did you just say the 1970s are back again. Those are the new Product Offerings . Oh man. Exactly. Those bellbottoms are coming back. No. They may require new shoes. Dsf reported 7. 6 comps and part of the reason why is new trends. Isnt this the second or third resurgence if thats the case . Its getting a little bit more residence now but we need something new because we havent had anything new for a couple of years but whats interesting is active and accessories isnt slowing down. Kate spade was here yesterday and sounds like some of their new bags are doing quite well. Youre Favorite Retail pick dana. I like tiffany right now. I like tiffany. The stock is down theyre coming out with new products. I have a good Balance Sheet and i have as europe gets better as what we sea stabilization in asia and hopefully some tourists come back to the u. S. And makes tiffany a brand under 90 now is certainly an interesting stock. Thank you for joining us today. Good talking to you. Thank you. Find out which names current currently have the midas touch. Thats next. 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 . With the power of digital, analytics and automation now every little thing can provide even greater value. Ok, so can it tell the doctor how long you have to wear this thing . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Welcome back to squawk box. Forbes unveiling its 2015 midas list. This is the tech world. 221 public and private companies with valuations greater than 8 billion. Here to talk about it chris upton the managing director of technologile at forbes. Good morning. Good morning. You want to view the list 10 to 1 to number 1. 5 to 1 . How about that . You can surprise us. Number 5, i believe is got the to help me with this. One, two, three, four to get to number one. Steve anderson. Steve anderson. Top heavy, steve was one of the first money into instagram. Most of these names are not public names. No theyre thought in that. But these are really the guys responsible for so many of big acquisitions. Why dont we go down the list number 4, josh copperman. In philadelphia again, very early stage investor on twitter. Tons of deals on both coasts. Chris saaka. Saaka, now that hes on the cover. A new billionaire. One of the first checks into uber. What does he make so far . For his investors, 5 billion. How much for himself . 1. 2 billion. Not bad. Peter fremton. He was in that double ipo day back in december. And was one of the biggest positions. Big winner is james getz. Getz is whatsup. That brought 19 billion bought by facebook. And theres another issue, women, where are they on the list . The list is 100 people. 95 are guys 5 r women. Not exactly an equal showing. Typical for tech we cant do anything about it. The first woman who has cracked the top ten, jenny lee from ggd from china. Do you think thats about to change or no . Also we saw ruth porat from morgan stanley. Yes. Things are going to have to change at the high school and grade school level to get more girls excited about technology. All of all of these people onetime wonders, say, tim goetz on the top here. He did whatsapp. Who is the up and coming guy coming out of nowhere . S assessment cacca. Theres plenty of people charles moldow. And excel, doing well hes young. Thank you for coming in. Sure. When we come back this morning, the street reacts to the deal of the morning. Kraft is merging with ketchup maker heinz which is owned by capital and Berkshire Hathaway. We have the deals straight ahead. Hello. 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[male announcer] if youve served in the military, certain habits may be hard to shake. For reintegration and adjustment issues big, small and everything in between, visit easter seals dixon center. Org. Jo nes. Zero, three, two, six. Here to make a deposit. [bell chime] ting want some ketchup with your hot dog, the pe. Firm with kraft foods and heinz. Weve got the details. Twitter and the gainers. And the comedy troupe behind the cult hit super troopers. Theyre looking to raise at least 3 million on ground funding site indygogo. What is so damn fun . Do i look like a cop to you . From tree to tree. As the second hour of squawk box begins right now. Living up in the city announcer live from the beating heart of business new york city, this is squawk box. Welcome back to squawk box here at cnbc. First in business worldwide. Im joe kernin along with becky quick and andrew ross sorkin. The loss futures at this hour indicated up 22 23 points or so. And the big story this morning involves a wellknown really an Iconic Company and that is kraft. And brazilian p. E. Firm 3g capital strikinging a deal to merge its heinz unit. I guess its a unit with kraft and heinz becomes a publicly traded company. Kraft shareholders will own 49 of the new company. Heinz will own 51 . Buffetts involve md Berkshire Hathaway and 3g will invest 10 million into the new company. Joining us now on the squawk is jonathan freely. Take it away. And good morning to both of you. Were trying to understand this deal particularly the valuation of the deal. Thats perhaps the most important part given that were combined effectively into a new company. Doesnt look like theres a premium in this transaction. Were trying to figure out how to value heinz. And how the market is going to value heinz which has been a private company. And, of course what this all means. So let me start with you, santa bernstein, if i could. Yes, so i think that this is just a reflection of the bigger structural changes going on in the u. S. Food industry at the moment. 3g was a little over two years ago. The acquisitional costs with that, with the dividends is the big upside to the holders here. The rest is just a merger of two entities. And the relative of the companies is what we need to look at here. Its a good thing for the kraft. But the whole thing in terms of where the company has been going is eye were the change of ceo and jon cahill. But it really does show that 3g does have a lot of costs to come out of the whole area of u. S. Food. And with the u. S. Food moves, it shows that the industry may well be with the move. Jonathan heres what im trying to get at though. There technically appears to be no true premium put on this transaction. Am i wrong . Well it depends how the market reacts to it. The other thing i would add besides the special dividend we havent seen the Balance Sheet yet so we dont know how that is going to be and whether that will change the earnings. And it called for 15 billion in that. With the ebita. And the synergy. Weve been trying to do the math during the break what this means for heinz, buff felt and 3g. Which is if you do the math kraft is worth, i dont know 36 billion or Something Like that. You just double it to 72. To put obviously the value or actually with the cash you get even higher. Probably into the 80s. Luke at that sandand say, what 42 billion in terms of the valuation of heinz. And then you back out that they spent 23 billion to buy it. Then you back out the dealt. What do you think theyve done . Plus the 10 billion in cash . Jonathan have you done any of that math . No to tell you the truth, thats a lot of number us,s, and no i have not done that math. The other question broadly for kraft, how fixable is it. A true slow grow and they have struggled. Ill go to alexi on this. Well the whole Food Industry is facing a decline. Kraft has a couple good brands oscar mayers the philadelphia cream cream that theyve been doing well in. But higher margins, jello those koolaids, crystal lights kraft mac n cheese thats has more power. In what consumers choose what they want to eat. They shift away into bigger brands and small brands like amys. Is Warren Buffett making a mistake getting involved with another processed food company . Well i think that the cost savings at 3g obviously have allowed the profitability of heinz to really soar. Despite of the fact that the frozen business has been shrinking. From a profit perspective and value perspective, it makes a lot of sense. But in terms of the longterm growth, they are coming down. Jonathan one of the things weve been trying to understand is the implications of this deal on potential other transactions what this does to other folks in the food business. What happens to a General Mills, for example . Yeah, well a lot of valuation in the Food Industry has been predicated on you know 3g or others potentially have interest in at least pressuring the companies to take out more cost. Right. Now that i think a major transaction has happened your initial reaction will probably do what happened when heinz did it which say bit of euphoria its about selective realization that theres about a dozen Food Companies which General Mills might be one. Weve been waiting for General Mills, campbells. Exactly. What happens tow is campbells on the block now . I almost say for the near term to the opposite right . Because this is a pretty big deal and is this going to take 3g who has been most active in this spatece out for a while. I think theyll be more focused. Do you look at this new combined company as a platform if you will for additional rollups . Selectively by category sure. But, you know youre going to have some pretty big for those in grocery, i think down the road when the company has a little bit more ability to do acquisitions that could become relevant. And theyre still only the Third Largest food company. Theres two heavy ones. Do they want to buy anything . At this point that seems unlikely. Alexia . I think if you see what 3g has managed to achieve over the years or people going to 3g with the alcohol and Beverage Industry as a rollout, i think this begs the question particularly because its a company that does weigh into question where might they go next. I think it interesting that kraft is a company, theres no family involvement. Theres no foundation with it. So i think the door is kind of wide open. But probably not going to risk making another move immediately. But the flexibility to have the further moves down road. And i would expect that over the next several years. Alexia, can we go back to this point. The Consumer Trends have been difficult. And jim cramer talked about that. All of questions about whether theres real cheese in cheese rolls and thats been a big operator. What do you think about those particular consumer headlines right now . I think weve really reached in the last couple of years, i think its a different online coronation happening with millennial moms. And a growing distrust with Food Companies. That campbells alluded to at a conference last month. And this is a feature for an industry that has been very secure, very defensive, very safe over the last several decades. And now were seeing the beginning of the breakdown by its entry of things breaking in. It is shaking the industry to its core. I think the companies General Mills is one example. So i think we are going to see a fairly big restructure of the industry. And Company Leaders sort of going back in and starting to rethink what products they need to market. What strategy and some very big changes about where the money goes. Awesome. Thank you, guys. Appreciate it alexia and jonathan thanks for the perspective. Among the other stories that we are watching this morning you an update on the germanwings a320 plane that crashed in the french alps. Experts are examining the black box recorder. The French Interior minister said the box was damaged but may be useful. American express is holden an investor day. The ceo will tell analysts how the Company Plans to deliver its longterm goal of Earnings Growth of 12 to 15 . Thats a account that became tougher when amex lost that account. And forecast looking for the headline to rise 0. 2 . Facebook holding a conference. And twitter announcing with indias government with a network of tweets. What does this mean . First of all, facebook developer they havent had it every year. Theyre having it this year. They actually made a slip there, an app for people going sent out a blast about the news out of the conference which technically hasnt been released yet. We know in Broad Strokes theyre going to talk about the facebook messenger. Theyve got half a billion monthly active users. I think well have an update on that. And parse for internet of things parse is sort of facebooks tool for helping to connect information that you might have about a user to their facebook profile. This could mean things like beacons of retail. Stores with wearables being able to figure out who that user really is. Of course thats important for advertisers. And something called teleportation station. And facebook has been talking about wearing a virtual headset makes you feel like youre somewhere else. Maybe this is way like a transporter like from star trek . Yeah. Molecules from one place like having oculus. I think were a ways off. Weve got the Virtual Reality that samsung is doing with oculus. They announced the galaxy s6 and 6plus. Oculus. The core product. Sony might be the first to bring to a Consumer Price point through the version that theyre working on. Gamers, they might be willing to pay a couple thousand maybe even 3,000. When youre moving molecules around like a fly in the yes. Jeff showed us that. Thats creepy. Things and the eyes. Yeah. If the molecules arent put back properly. This is years off. Lets hope. Give us a quick brief thing about this whole twitter deal. I think whats happened with twitter, particularly with markets like india. Again, facebook is connected to this because whatsapp is working with people in india. Its become a broader communications industry. Not just that person to government. Twitter needs to get into this. Is this their effort to cap up tch up. The industry is very high. 10 . Facebook actually head of twitter. Just to understand all of this facebook stuff youre talking about was accidentallily leaked is that right . Facebook accidently leaked. How does that happen . Well details arent out yet. But we generally knew they were going to talk about it. The parse internet of things. And how come they call it f. A. Instead of fap . I dont know. The vice chairman of city groupe. And then the group behind super troopers. Super troopers. Yeah okay. Looking to find the secret. Plus why airfares arent coming down as the price of fuel falls. And we will go inside the food business with the cfo of grocery giant kroger. Were going krogering. Which is the old ads. To actively uncover, discuss and debate investment opportunities. Which leads to better decisions for our clients. Its a uniquely collaborative approach you wont find anywhere else. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. under loud music this is the place. Their beard salve is made from sustainable tea tree oil and kale. You, my friend, recognize when a trend has reached critical mass. Yes, when others focus on one thing you see whats coming next. You see opportunity. Thats what a type e does. And so it begins. With e trades investing insights center, you can spot trends before they become trendy. E trade. Opportunity is everywhere. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. Welcome back of negotiation. Why do you thampg happens . I dont think a lot happens. One of the things that could happen, which would be great if this fix that we pay dock zwrors. Right, after 20 years. Theyve gotten together. We understand where it goes. Each year a 20 to 30 decline in what were going pay them. That frustration from companies. So i think its not impossible. But by having that is holding the Republican Party hostage. They get frustrated, blah, blah, blah. Have where you seen obama move on anything in terms of this . Well, again, i think, look. Hes proposed a Corporate Tax reform. The budget includes a Corporate Tax reform. Thats more details. With Corporate Sales going up and closing loopholes. Well, actually, thats the thing. This is why its so hard. Everyone says Corporate Tax reform. That means closing loopholes. Thats part of what we do. Therein lies the problem. There was for president there. No president romney that said they need to be far right. Whos going to vote . Where are the votes coming from . Even though moderates are disappearing. Thats still where the swing votes are. Thats still where it will even brake all by itself. It is a luxury suv engineered to get you there and back safely. For tomorrow is another fight. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. The future of the market is never clear. But at t. Rowe price we can help guide your retirement savings. Our experience is one reason 100 of our Retirement Funds beat their 10year lipper averages. So wherever your longterm goals take you we can help you feel confident. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Call us or your advisor. T. Rowe price. Invest with confidence. The answer to todays aflac trivia question. Who was featured on apples First Company logo . The answer sir isaac newton. And now the comedy troupe with the sequel to the cult hit super trooper. The group wants to raise at least 2 million to fund the production. Already raised more than 1. 5 million. Youre not buying it heres money to please make this. Its kickstarter work. You can actually get a stake. Kickstarter, they give you a free ticket or sweatshirt. You have seen super troopers . I have not. It sounds like scooper, doesnt it . This is your morning routine. I think im actually the scooper right now. When you come back its a hot topic on the set. The cost of fuel but airfares have not come down. Right now as we head to a break, take a look at prices over the last six months. Sfx engine sounds introducing the new canam spyder f3. With a cruising riding position and the most advanced vehicle stability system in the industry. Youll ride with a feeling of complete freedom and confidence. Visit your canam spyder dealer and test drive one today. The new spyder f3. Riding has evolved. Among the stories front and center. It is now official, 10 billion investment from 3g capital and Berkshire Hathaway. And Charlie Evans can see no court hurry with rate hikes. He points to worries about the strung dollar and its disen disinflationary pressures. And ted cruz is taking a break to help with the campaign. Also take a look at this video. This was caught on tape. The bus actually falling through a crater in a road in north brazil. The passengers were able to escape before it fell through the crater. So fortunately, nobody was hurt. But immediately after falling through the crater the bus was swept down a river. And they all got out . They all got out. Thats amazamazing. I saw a bus that ran into someones house. Did you see that . I did see that. There are two kinds people in the world, theres dog people and cat people. Never the tween shall meet. Coke people pepsi people never the tween shall meet. Then there are people that think like the oil companies, prices go up they had nothing to do with that they should tax that. Windfall money. But when prices go down they should be let to fail thats their tough luck. On the converse all prices go bankruptcy, they have to merge to stay in business. But when they come down that needs to be passed on to consumers. Lets get the debate started with the next guest. The former chairman and ceo of Continental Airlines and a cnbc contributor. And charlie, lee ohka the chairman of the Consumer Protections board. Gordon, the airline is going to read 5 billion in things they had nothing to do with. Why not pass that to consumers and make ticket prices cheaper . Good question. Why should they. Its been a negative number for the last 20 years. So having a couple of years of profitability is kind of refreshing. And i guess ill try to get your take on it charlie. Share owners are willing to put their company at risk. They know there can be either a big profit or they can lose all of their money in a bankruptcy. Weve seen it again and again. So if theyre willing to take the downside with the bankruptcy, why shouldnt they be able to profit since they put their money on the line knowing full well that they could lose it. Why shouldnt they be able to profit when things are going better . Well i think what weve got here, weve got a situation where weve run too much competition out of the system. Were in a place where we have only got three big network carriers. Three Main International airline alliances. They really dont have to follow the law us of economics anymore. Theyre known in a situation where they can restrain trade in a way by cutting capacity. Lets take a look gordon. Ive got a chart of airline prices since the 1970s. Ive made this point again and again. Lets see what this has done for airfare prices. This is adjusted for inflation. Theres going back to 1979. 650. Theres two charts there. One adds in the baggage fees that people started adding in now. Thats the inflation adjusted price. Since the year 2000 not inflation adjusted the average round trip ticket there has dropped by 15 . So these are monopolies. Charlie, wheres the evidence of that in what you just saw in the fair prices . Well if you look at the fair prices we have come down to three airlines here in the United States until this last year. So everything you have so far has nothing to do with reality today. And, next i think that weve got a situation where weve got a question of trust. Back in the days when mr. Bethune was running continental, the American People had basically a lovefest with their airlines. They trusted their airlines fun got on an airline you knew you were going to get somewhere. Now the airlines tend to not want to tell us how much the prices are. And the people just dont trust the airline. I dont even know what that means. They dont trust the airlines. Plus, im sure charlie, youd agree that dealing in a world with Climate Change makes it much tougher for im sure you believe in Climate Change. Look, how would you like to run an airline with the weather patterns that weve had recently. People dont trust airlines why . Climate change thats pretty go ahead, gordon glp. This is getting ridiculous. Number one, theres four big airlines. Number two, you dont compete on price. The morons have left the stage and nobody is going broke. Up cant buy market share. If american has lowered its price so do the others. Gordon i understand have to say, i think this whole thing has been miscast. Which this is a story about competition. Not about whats happened over the past 20 years where the prices then. Its where the prices now. Given that oil prices have come down. Not that it should be passed on to the consumer because the consumer deserves it but if a free market if theres true competition an airline like american that doesnt hedge, should say you know what were going to take it from united. It doesnt work. Theres no morons left to do it. If you lower your prices united is going to lower its prices. Youre not going to get a market shays. Who is controlling at the airport . Well its a duplex at the airports. Most airport, have decided they dont want to compete with each other at all. And a lot they dont even try. You can so from sarasota, florida, to spokane, but theres not going to be a nonstop. Theyre not competing on price at all. What is that about . In a free market thats a very peculiar thing. Because it doesnt work. It doesnt work. So you can thats your opinion. Gordons point is if you compete on price youre going to get the situation well lets look at the chart of the xal. The airline index. I wish i could go back farther. You look at the price. In your article, you said Something Like the reason they got into trouble, because there was too much of a free market. Gordon which i never had seen that phrase before. Thats an actual phrasing there. The free market is just too free. You love a free market. But you said it was too free. Well you had a combination as he would say moron managers and too much money going into an industry that doesnt make sense. Theres how the index is. Everything on that chart is almost irrelevant except for lit really the last year. If you add up every year that american has been in business theyve lot money. Right. For 20 years a zero return on investment. Margins were zero. Now, theyre double digits. And now people want to come in and say the profits arent fair for you. Nobody is saying the profits arent fair. How much more competitive when prices are down 50 over 30 years, what caused that . Listen everyone deserves some return on invested capital. Boeing makes a lot of money. Airlines themselves should make money. They havent. From stability in management and volume, theyve decided to make some spoken. Money. So they control the supply so they dont have to cut prices. Thats exactly what youre talking about. Youre making the argument for us gordon. Im talking about controlling capacity. Controlling capacity is an anticompetitive operation. It is not it issis not the way the premarket works. Listen flooding the market with tangerines doesnt work either. You dont flood the market with Airline Seats you cant sell. They lost all their equity. Shareholders lost their loans. We need a stable airline economy. We have one now we ought to rejoice instead of saying they should go broke. I think what we should do we should have an Airline Operation which is honest eye were the people people. For years we heard nothing, except over and over again that we have to raise the airfares because fuel surcharges are going up. That was true. You just dont like it. But its true. Its knocked down more than 50 and youre still sitting here say, oh fuel charges that makes no sense whatsoever. Youre not listening. If you bought all futures in 16 and 17, your fuel prices havent gone down. And they have bought futures out into 17. What is it that you dont understand . You have to understand it doesnt run day by day. On one hand it went day by day, on the next hand all of a sudden, we have to think out until the end of 2016. No no. Theyre going to pricing whatever maybe, the money. Between the consumers and the airlines. And so the fares are so high the equipments are so significant, and its hard to when you finally get to a point in terms of capacity where the industry is final stable and vibrant. And then and then pays the bills. 5 billion in profits makes me really petition the example of perfect competition in any Economic System are very small. Very rare. They have to be 50,000 players. Weve got no players now. Down to four according to bethune. Thats why theyre down 50 since deregulation. Anyway thanks. Charlie were talking about since the latest consolidation. Maybe theyll start increasing this year. Thank you. Okay. After that debate weve got a lot more talk about on a different topic. Coming up not all companies are complaining about a strong dollar. Cincinnatibased kroger giant said its benefited. Weve got the cfo right after the break. That fits your budget. Uhoh. The name your price tool. Shes not to be trusted. Kill her. Flo it will save you money the name your price tool isnt witchcraft and i didnt turn your daughter into a rooster. She just looks like that. Burn the witch the name your price tool a dangerously progressive idea. Hello. I am a fully automated Investment Advisory service. I can help you choose investments. Monitor them. And rebalance your portfolio. I can do a lot of what humans can. Except have a real conversation. If youd like that, you can always speak to someone at schwab. They arent algorithms. Try not to hold it against them. Say hello at intelligent. Schwab. Com help brazil reduce its overall reliance on foreign imports with the launch of the countrys largest petrochemical operations. When emerson takes up the challenge its never been done before simply becomes consider it solved. Emerson. Welcome back. Shares of kroger trading at an alltime high up this year. Joining us from mike schlotman, cfo. Mike why you ever got rid of the lets go krogering jingle that i grew up with in cincinnati is beyond me. But any chance you could bring that back . Can you hum itty yit . Do you remember it . I actually remember. Im 58 years old this year. Ive been around 30 years. So i definitely remember lets go krogering. A lot of people refer to their kroger store as their kroger store. A lot of added result from a lets go krogering jingle. Well i wasnt allowed to say kroger because my uncle had a little grocery. He was a butcher. That was before supermarkets put mom and pop businesses out of business. Thats how far back i go. We were just talking about competition. Supermarkets type of competitive business. What are margins typically running at kroger . Well our net margin is under 2 but competition, its been first in this industry all 30 years ive been here. Ive never had a year where we said, oh this is going to be easy because competition is soft isser. We put our ads out every week so we know what everybody is charge for the product. Our goal is the customer. We try to figure out what the customer wants and try to give them the best price and best convenience and best Shopping Experience we can possibly figure out. You saw the merger today. I guess kroger needs to think about that shelf space and Everything Else on a daily basis. Is this does for consumers, bad for consumers or it is what it is . At the end of the day, its really up to the consumer. You had a guest on earlier talk about its really a consumerdriven time. Whether its a nationally organic product or products now in the high 10 of or a Natural Organic line. Super truth. That topped the sales and only an 18monthold brand. Kroger was inquisitive for a while. What is the last big acquisition . And is that over in the supermarket industry . Well theres always a lot of activity throughout. We merged with ed withd with harris teeter. In january it closed. Were had a Good Relationship with harris teeter. Theyre wonderful people. But us in geography of states we had a growing population. But there continues to be other assets out there that could wind up being attractive over the years. You just never know. Safe 0 say anything happens in our space, we probably have looked at it but reacted on very few opportunity. We looked at the right one us. My i have a weird one for you. I followed the story but didnt understand it. In the fall there were groups that had organized suggesting that kroger was allowing to put open carry firearms in the supermarkets. What was that about . And where do you guys stand with that . That was moms demand action. They were opposed to the fact our policy is to adhere to the local gun laws, if the local gun laws allow open carry, well allow customers to do that. Based on the local gun laws. We dont believe its up to us to legislate what the gun control laws are. We follow local laws. We ask our customers to be respectful of people they are shopping with. We really havent had any issues in the store. You hired 25,000. Are you seeing wage pressure to get the people that you want to hire, mike . Well theres certainly a wave out there of people denouncing lower entry wage. Our entry wage is around 14 an hour. One of the things we can offer people, those 25,000 jobs you mention wed created last year almost twothirds of our managers started as parttime clerks in the stores. These are people who may not want to go to college for whatever reason. They could be in their early 30s or 40s, running the Grocery Store making 100 grand without a college degree. The market is going to decide what the wages need to be. And were very happy with how we treat our associates. Whats the rate on kentucky tomorrow night . Well im a kentucky grad. It just so happens our ceo is also a kentucky grad. Ill be up watching them beat the mountaineers. Ive got to stay true to the big boy. Oh yeah it could be Wichita State if Wichita State beats notre dame. It will be saturday. Anyway yeah right, you got west virginia. Hopefully, well still be playing this saturday and next weekend. And huggins has that big cincinnati connection, too. Thank you, mike. Well see you later. Good luck. When we come back this morning, we will have a special guest joining to us talk about the heinz kraft merger deal. Warren buffett will be joining us on the top of the hour. Dont go anywhere. Well be right back. At mfs, we believe in the power of active management. Every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. Which leads to better decisions for our clients. Its a uniquely collaborative approach you wont find anywhere else. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. Welcome back to squawk box, everybody. It is official, heinz is buying a controlling stake in kraft. A 30 billion investment from 3g capital and Berkshire Hathaway. From omaha what Warren Buffett will join us live after a quick break. Stick around. You had some blocks and you had major thoroughfares and corridors that were just totally pitch black. Those things had to change. We wanted to restore our lighting system in the city. You can have the greatest dreams in the world, but unless you can finance those dreams, it doesnt happen. At the time that the bankruptcy filing was done, the Public Lighting Authority had a hard time of finding a bank. Citi did not run away from the table like some other bankers did. Citi had the strength to help us go to the credit markets and raise the money. Its a brighter day in detroit. People can see better when theyre out doing their tasks, young people are moving back in town the kids are feeling safer while they walk to school. And folks are making investments and the community is moving forward. 40 of the lights were out, but theyre not out for long. Theyre coming back. A crafty deal for Warren Buffett. And the comaker of ketchup maker heinz. A trip inside the monster food deal. And well look at other potential tie ups on the menu straight ahead. Plus a host of Companies Making cuts amidst quarterly reserves. And could see the streak come to an end. Well go inside the numbers. And doing this in a slowgrowing economy. The ceo tom donahue talks about the Companies Facing challenges and the future of the Economic System. The final hour of squawk box begins right now. Announcer live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box. Here on cnbc. First in business worldwide. Im joe kernin along with becky quick and andrew loss sorkin. Were less than 90 minutes away from the opening bell at wall street. Just barely. 89 and change. 19 seconds. Well now its 16 seconds. Were going to stop updating you. The futures right now have turned negative. Theyre now down eight points. It was a strange session yesterday. I feel like were kind of in a limbo. Kind of a no mans land. Ended up that it rose at the session yesterday. I dont know. Up 4 . The rest of europe is not so active this morning. We have a top story, though. And i think were going to have a top guest. We are. That story this morning is heinz and kraft merging. Heinz actually buying a controlling stake of the company. 51 . The deal is being financed by a 10 billion investment from 3g capital and berkshire handling thaway. Joining us is Warren Buffett. Warren thanks for joining us. You warned us in the annual letter to shareholders that you were still on the hunt. You even mentioned that youll be looking forward to doing business with 3g in the future. How long has this been in the works . Its probably been in the works about four weeks or so. It moved along. That is a fast deal. And its relatively complicated. This is not a straight buyout. This is a situation where 3g and berkshire through heinz are going to be taking a 51 stake in a newly combined Public Company of kraft and heinz. A special dividend that comes out a 10 billion payment. How did you come up with the structure . Well, it was a matter of negotiation. And its correct that 3g and berk hire hathaway will invest 10 billion in heinz just prior to the deal. And that money essentially will be paid out in a 16. 50 share dividend to the kraft shareholders immediately before the deal is completed. And then probably only about 600 million kraft shares outstanding. After the deal there will be rough a 1. 22 million. Of which berkshire and 3g will own 51 . And kraft shareholders will keep their shares and own about 49 . Warren in the math on your forecast thus for on heinz on itself it looks like have you made five times your money already . No no because we put in 4. 25 billion to buy common stock of heinz initially. And then were putting in another were putting in a little over 5. 2 billion, because we have about 53 of heinz coming out at once. So were putting another 5. 2 something billion. So we only have 9. 5 billion roughly in the common stock. And well own 320 odd million shares of the new company. Of course, the stock youre looking at will go exdividend at 16. 50. So about 320 plus million shares roughly, in the new kraft heinz. And that electricalwill be the present kraft stock. Sos aBerkshire Hathaway shareholders just try to gauge the valuation of their stake in all of this relative to where you were in heinz before whats your math . Well we will if we own 320 millionplus shares in the new company. And we paid 9 billion, we will have paid a little less than 30 a share for our stock. In the new Kraft Heinz Company. That stock closed the kraft shares closed at 61. 33 today. Indicated to open today around 83. 60 but as you mentioned that is before the exdividend and special in time payout. Right, right. Warren one of the questions we had about this is clearly, youve done a remarkable job. And 3gs done a remarkable job at cutting cost and raising margins at heinz and ostensibly can do the same thing at kraft. Shortterm great investment. The question raised by analysts and jim cramer is the long term of kraft, packaged foods, packaged goods. In a world moving towards all natural and less packaged what does that portend . The short term doesnt make much difference for us. We will be in this stock forever. This is a business for us. Its not really a stock. Its a company that will own 26 and a fraction percent. So its where the new Kraft Heinz Company is 10 20 50 years from now that counts to berk hire hathaway. And i like the brand. And i like the management a whole lot. And i think well do fine over time. But that you know we will see how much with the cheese and oscar mayer hot dogs and a whole host of other products people were eating 10 or 20 years ago. But i first went into general foods on behalf of berk hireshire hathaway. These brands of kraft, a lot of them came out through brands that i liked 30plus years ago. I like them today. And i think ill like them 30 years from now. Warren your tastes are wellknown. You like things that most 5 year olds like at birthday parties. Some moms are not as evening tore feed their kids foods that they dont think are natural coming from other places. They dont like preservatives. Kind of a slant, warren where im sitting. Like a 5yearold at a birthday party. He said that himself. I think thats a compliment. You sort of said it. Theres 70 billion people in the world that have different tastes. But the taste that kraft and heinz for that matter have appealed to you know over many, many decades. I think heinz goes back to 1869. I think those tastes are enduring. There will be plenty of people that want to eat other things. But there are plenty of people that want to eat the products that kraft heinz puts out. And there are new items that are hitting the shelves. So theres a management. Just on the common stock, 9. 5 billion. And 8 billion preferred. So i think that will get called. Warren you mentioned there are 7 billion people that youre serving. Kraft is focused on the domestic market. When it split. Does that mean youre pushing the brands your internationally . I certainly think thats a possibility. The management of the new kraft heinz, theyll be looking into it. But a lot of people like these brands in this country and in canada also but i think that were the new company will be free to an extent to make sense to it graphically. What does that mean any agreements it had with mondelez before dont stand . Any agreements do stand. They do have timetables on them. Theres multiple parts of the agreement. But theres a lot of freedom to expand internationally with the brands that exist. And heinz brands are throughout the world. So theres an infrastructure that handle the expansion of it outside of the u. S. And canada. You used to be a holder in shares of kraft before that split in the company. Thats right. This is the third time around for me. But this is an ownership of a business, where at first it was ownership in stocks but its true in the early 1980s, i think we were the largest shareholder of general foods which later got sold to Philip Morris. And then kraft got sold to Philip Morris. So these brands are brands a good many of which we were a big owner of back in the 1980s. Then not so many years ago, we were probably the largest holder of kraft itself which got split into two companies, mondelez and kraft. So ive been fairly familiar with the brands over the years. You keep saying that youre owning this is a business and not as a stock. Right. The only difference seems to be when you own it as a business you know the managers doesnt like the managers . Right, well be on the board of directors. There will be six directors from heinz. There will be five directors from the old kraft operation. And three of those Board Members will be from Berkshire Hathaway. Its a pivotal Holding Southern part. We all thought it was a platform to buy more Consumer Food and Beverage Companies like kraft. And a possibility to put some debt on this thing. I know there is not it doesnt look like in this transaction. Should we expect to you look the aother competitors in this space . We all thought that campbells would eventually get bought up General Mills, for example . Well i dont know of any possible but the we look at everything. There is no finish line in either berkshires investments or 3gs investments. So weve got a wonderful partner. I knew they were wonderful going into the heinz deal. And in every respect, both in terms of ability, but just in terms of integrity, every aspect of it 3g has been a perfect partner. Do you ask this a platform for more rollups, if you will . I dont know if i call them rollups. But its certainly a company that ambitions for a long time. Warren speaking of private equity i know how you feel about lehman and 3g. Youve spoken repeatedly about how much admiration you have for them. You as laid out a section where you took private equity to task. You said in truth, equity is a dirty word for expect buyers what they love is debt. Because its so expensive, these buyers can pay top dollar. In effect, the business becomes a piece of merchandise. Whats different about 3g versus the private equity players that you really gave a tough time to . Yeah well the 3g people are putting in almost 5 billion more of equity. Were putting in more of equity. So we are adding roughly well, we are adding 10 billion through equity here. But the more important point even is that 3g theyre not buying things to sell. And the other private equity firms that have term limits and all of that they have a time limit to sell something. And they buy companies with the idea of either ipoing them or selling them to competitor, or selling them to another private equity fund. That is not 3gs strategy. I dont even think its proper to call them a private equity firm. Theyre buying to keep just like were buying to keep. If you look at anheuserbusch, abi, they have been in business for so many burger king they bought that to keep. You cant put them in the same category as basically the Firm Information the business of buying and reselling companies. Warren this is say very unusual structure in terms of how its put together. Do you think there could be any kraft shareholders who say in a way they think theyre getting a premium its a bit of an unusual structure . Well, it is a bit of an unusual structure. So far it looks like they like it. If they dont like it they can probably sell it for a lot more than kraft could have been sold to anybody else. So it is when we made the deal, we felt that the kraft shareholders would come out very well. I think so far, the market feels the same way. Management structure. I realize the new company is going to be called kraft heinz. The Management Structure is that the ceo of heinz is going to be running the business . Yes. Alex bearing is the chairman, hes very active. So youll have the managers have done a remarkable job at heinz the last couple years who will be continuing on that. And living in pittsburgh and hell be the ceo. You know you really should think about calling in here. You know you cant get off just talking about this deal. Did we tell him we wouldnt ask him anything else. I didnt make it a point. If you want to talk about bricks bricks ice cream. What is your favorite flavor . Yeah i particularly like the black raspberry with the chocolate chips. A lot of chocolate. Theyre really good. Maybe kraft ought to look at them. I know. A finders fee goes to you, joe. I dont know if i can accept it. I know youre is not an expert on greece or the euro or anything else. Theres just been a couple things in recent days just watching it. Im wondering whether user changed your overall view of whether this really does get when they will help you out no matter what. Has that exchanged at all . Have we hit an inflexion point where it might go the other way in your view . Well i always thought the present arrangement for the euro would not stand the test of time in the sense it would have to be modified in some version. What you did, you harmonized a currency without harmonizing it with big effects on the currency. Over the long run, i felt that some adjustments would have to be made to that. And the greek situation may illustrate the kind of adjustments that are needed. It was a situation where you said were going to have a common currency but were not going to have fiscal and common labor practices. And that was sort of like we cant exist half free. I dont say that the euro wont continue because the odds are it will, but i think more will be needed. And i think the greek situation just dramatized the problem. George soros, i dont know if you saw what he said yesterday, he thinks theres a 50 chance that the greeks wind up out. And 50 chance that the economy could even i dont know a view on that. But the greek situation does show that certain modifications, you know, but as i said before our constitution has been amended a number of times. Whatever came out in the 1990s, they have to get modified in some ways. Originally of course there was some language in there about the deficits that the companies that the member countries could run. But they got ignored when even the biggest countries broke them. And they have to get tougher about that. Hey, warren can i just go back to heinz for one more second. Some people have looked at this deal and said its almost a back door ipo. Youre taking 51 of the company. You always say when you want to own something you want to own as much as possible. Was there ever a thought about buying the entire thing outright and perhaps putting even more equity in the business . You have a lot of cash on hand. Or perhaps putting your debt on the deal . Youre right i like to own as much businesses i like to own as much as we possibly can. But it reflects the view it reflects the negotiating strengths and the view us of two different boards of directors as we negotiate the deal. This is the deal that made sense for both kraft and heinz. I dont think another deal would have been possible. Would you imagine taking on another deal in the future . Who knows. You know you just dont know the direction this new company will go. Whether it will have an opportunity to buy an operation to add to it. Or what will happen. The one thing i can promise you, you will not see berkshire reduce its interests. Warren have you looked at other companies that you might want to look at this. Start looking at campbells soup or mondelez. Even. Mondelez is obviously a much better market than kraft. Ive looked at all the companies. When heinz came originally i said yes before the sentence was out of his mouth. The same was true with general foods, Philip Morris which ended up owning kraft and general foods. So campbells soup i mean i keep track of them. And then the question is, you know, does something make sense down the road. And we wont do anything we wont do anything hostile. So it has to be something that the other side wants to do as well. Well warren i must have missed it did netjets cut the price of travel in half because of oil prices or are you greedy profit mongers just keeping that for yourself . Actually we had a few adjustments. So when it went up the netjets owners paved a surcharge based on higher fuel prices and that comes down. Always got an interest directly in the fuel costs. All right. Maybe we can finally maybe we can finally warren again, while we have you on the phone, we talked to you in the past about ibm, im just wondering i know this is something you that weighed in a couple months ago. Where do you think about the shares of ibm and the job that theyre doing . I think shes doing a fine job but i would not comment on anything on that. Warren we want to thank you for calling in this morning. We appreciate your time. Again, thank you, well talk to you soon. Okay. He never goes i cant you i cant yeah, he never does that. I think he was close, though. A couple times. Okay. Weve got it right here. What do you want to put it on . I dont put it on hot dogs do you . Yes. Yes. I put it on meatloaf. I havent had meatloaf in a while. Put it on meatloaf turkey burgers. Turkey burgers, yes. I like yellow mustard. Heinz makes yellow mustard, too. We dont have anything for that now, right . Miracle whip ooh. Mac n cheese. I like it. You do . I like the real stuff. Joining us right now to talk more about the appetite for deals this morning is howard silverblack. And bob dole. Bob youre here on the set, what do you think about this deal this morning . I think you have the right question becky. Moneys cheap. Private equity, all warren said in his annual report about it as long as financing is cheap, were going to get a bunch more deals like this. Because its a lot easier to justify them than when Interest Rates are normal. Whatever that means. So were going to get more deals. Big deals . I think well get big deals, yeah. Howard, how about you . Especially that 9. 7 billion dividend. But definitely bigger is better. Going back to consolidation. Probably the fifth largest food company. Speaks to the availability of money. And building up, as compared to break down which was still a trend in a lot of companies. Divestiture. Bob, youre not concerned about prices that have risen to a point i know youre talking about cheap financing but weve seen a run in the markets the this point. Knowno question about it becky. The other side is when stocks were cheaper a lot of companies wouldnt contemplate doing business. Rates are still low. Yes, prices are up some so i think the confidence has made up for that so well get more deals. We originally were planning on talking to you guys about dividends. Weve seen Companies Slash dividends. Its not something that happens frequently. But it happens right now. There is question when well see that in the oil patch or when exxonmobil, who has traditionally raised it in april will go that way. What do you think. I think Oil Dividends are under pressure to at least not be increased. I would not be surprised if exxon passed on an increase. A lot of lowerquality energy company, are probably going to have dividend cuts. For the markets as a whole theres still a lot of cash. Dividend ratios are not high as earnings have gone up. I think dividends will appear in the market as whole where dividends outpace. They either cut their dividends or dont raise. What does that mean for the stocks . The reason they usually dont raise them is energy. Im not a bottom fisher watching carefully. I think there are too many people trying to catch that. Its going to take time. Its rare you that see Companies Cutting dividends. We saw that in the financial stockings. They had to do it. Went down to one cent a quarter. Exxon has been paying for 32 years in a row increases. Mostly in april. I dont see them taking that out. Even at the current estimates, 2015, based on the gap numbers, its still a 70 payout. I just dont see them kwutcutting at this point and admitting to the entire world that we have a cash flow problem at this point. Im looking at even though the payouts are generally low and 70 for them to slightly increase come this april, to pull it back later, they do it. It may not be the double digit that they had for the last couple years. At least 4 . 4. 3 would take you to 288. They pay 11. 5 billion. Theyre doing 13 billion on buybacks. They can deal that for a couple quarters. And then if they feed to cut back after. I think its a little too soon for them to take it down. But if youre talking about cutting back later, why not just raise it right now. Make sure youre paying people what youve been promising all this time. And you have peoples expectations up to. Why raise if you might be in a position to pull it back in. Why not maintain the status quo. Because they have a decent balance. The cash of 1 billion. The buyback that they have shift it into there. Where oil is going to be in six months nine months 105 back in june. Stock is not doing great but better than the rest of the energy sector. Especially much better than the small caps where we expect a lot of cuts and dividends. At this point, pulling back your dividend is the last thing do you. Youre telling your owners that ive got a problem and its not short term and its a cash flow problem. Dividends are cash flow. A check in the mail. You have to have the money. Theres no pro formas. I want to thank you both for being here. When we come back durable goods day. And later, u. S. Chamber of commerce ceo tom donahue will be talking about the system. Stick around. vo rush hour around here starts at 6 30 a. M. On the nose. But for me, it starts with the opening bell. And the rush i get, lasts way more than an hour. announcer at scottrade, we share your passion for trading. Thats why weve built powerful technology to alert you to your next opportunity. Because at scottrade, our passion is to power yours. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless earn more. Welcome back to squawk box. Breaking news. February durable goods reads seconds away. Were looking for a number up two to three tenths. What were looking at a number much lower mind that. 1. 3. If we look last time negative direction. Also a positive number from 2. 8 to 2 . Lets look at the internals. Lets strip out transportation. The number improves but still stays negative down 0. 4. If we look at a proxy, capital goods orders nondefense exaircraft business investing what were looking at is nine muss 1. 4. If we look at the shipment side thats up 0. 2. Pretty much every breakdown of this number is a little less than we were looking for. Another sizable revision was on the orders of nondefense aircraft, up 6, thats an optimistic part of the report that now stands at down 0. 1. The preopening market is categorized by a strong euro. Yes, the dax is down. Preopening stocks in the u. S. Is down. And were below that super significant flashcrash low yield from october 15th, 201 is4. That was the yield. The one basis point below it to keep an eye on 16310164. Well below the current market. Organize just higher in price. Back to the desk. Rick thank you. Steve liesman is here. I have a patented method of looking at the data coming out. I look down the road at the negative positive sign. I see general machinery down computers down what else . Transportation equipment down. Decline in defense aircraft as well down 33 . Everything is down. Capital goods. As rick correctly pointed out, not only is the critical Business Investment proxy that we use here down but they revised away from last year. Now, the shipments are actually up. So a little unclear how this all feeds into the gdp. But it goes along with the softer data that weve had suggesting this First Quarter is really go to be were running a little bit above 2 for the First Quarter. 2. 2. We started above 3 in forecast. Were now down to 2. There are some forecasts out there, 1. 5 . The Federal Reserve bank of atlanta less than a half. The average of the street is going to be below 2 . Do you think thats weather or do you think this is business pulling up again . I think its partially weather. But i want to show you a chart i put together in anticipation of that question that you didnt know you were going to ask me. Here we go folks. Take a look. This is the First Quarter since the expansion. What do you see there . The First Quarter has been not just weak but off the charts weak chaired to every other quarter. We simply dont know why that is. That number is a mix of following numbers. 1. 7 in 2010. Negative 1. 5 in 2011. And then the negative 2. 1 last year. Last year it was weather. It was a bouncedown from the Fourth Quarter 2011. Its uneven growth. And it really, i think, is the reason why people say, you know what 2 is the right number when you average it all out. There could be seasonal issues in there. But i will say that betting on a bounceback from a weak First Quarter has been a pretty good bet. It seems to have happened pretty repeatedly. And the numbers are weak but not as weak as they were last year. You had dana tolscy on this morning talk about the effect of weather on retailers. We had others talk about the effect of weather on housing. All you can do is wait and see. I will tell you this is an issue for the Federal Reserve. Theyre going to want to see a little more confidence i think. You had Charlie Evans this morning say change the metric a little bit. He needs to be quite confident that inflation is coming back not just confident. The u. S. Chamber of commerce is holding their annual Capital Market summit focusing on what theyre calling a truce of the Financial System. Tom donoghue ceo of the u. S. Chamber. Joins us with more of a message coming from the chamber. Cant wait for the truce. As andrew said we can just do a reverse or just leave it. Or just leave it. Good morning, tom. Just looking over this. Every time theres a crisis right when were dealing with it everybody says make sure we dont overshoot an error on the other side. Do you think theres another evidence to say at this point, maybe at least in certain areas there was an overshoot designed to hurt people it was designed to protect . Of course there is. Thats not a criticism. Its a really when large numbers of regulators from different regulating agencies get together to achieve an objective that running only together but against each other. And creates a huge problem for those trying to implement it. And achieve the objectives that have been stated. In this instance everybody got together and said what we have to do is protect the consumer. And were doing a good job on that. Were doing such a good job on that. Were denying the consumer the amount of capital and the Banking Systems that the Consumer Needs to be able to run their Family Affairs and to run their small businesses. Or to run their other activities. And if you went into a Regional Bank which you we all know about, you know you pick the city, youll find five to seven regulators living in that bank. What theyre telling those bankers is often in conflict. And we just have to all slow down a minute. Take a deep breath and figure out what were trying to do. And how success full are we being. Were also you know the chamber has a lot on its shoulders. I wouldnt even just talk about the Financial System either tom. Weve got some type of weird new normal where corporate profits are at record highs, but we cant get out of you are own way in terms of gdp at 2 . And, you know employment while its improved theres still a lot of people that would like a raise and a lot of people that would probably like to have more work. So theres something in the Regulatory Environment across the board in this country that should be addressed that no one seems to really want to address at this point. Its about raising the minimum wage or some other type receive distribution. Well, theres a fascinating issue about the regulatory process. Just remember, by the way, all the regulation we pass we add on top of the regulation weve had since Christopher Columbus came here. And we never take any of it away. We just add it add it add it. But if you look at the employment that has taken place in the United States in the last few years, a good deal of it was because of energy. And some of it because of health care. But the real employment across the board, the jobs that you see being added in the established companies, are not to create new products. Not to drive the economic growth. Theyre there to meet and to manage all of the regulatory additions put on the companies. We just have to pause for a minute. Were not going to get rid of regulation. We need regulation. We support regulation. But its got to be common sense. It has to work. And it cant get rid of risks. If the objective that some people have is to get rid of all risks, then there can be no reward. There could be no growth in the markets. There can be no expansion of your pension funds. What we need to do is get rid of the old stuff, adjust the new stuff. And understand theres no root to perfection. What we need is regulation that will service well as markets change at home and abroad. Tom, the budget wrangling that were having right now, it also said that business requires that go with the earned income, do that do this. What in return theres a couple of things we can agree on wed like to admit this is a poisonous environment right now. Isnt there a couple things youd settle for and youd make concessions to support what the democrats want . Im going to tell you that im really very excited and very pleased about the budget wrangling. Its because we havent been doing budgets in the senate for many years. Its because budgets in the house were singleparty budgets. Were having a serious conversation about the real predictable crisis in this country. What did we do eight, nine years ago from now on entitlement costs. And the member of the body both the house and the senate are beginning to look at this. What is the reality about defense spending . We all look around the world and we know were not going to get away with what we budgeted. And people are looking for a way to do this in an orderly process. I think were trying to control costs. Were trying not to run up definite siltdif deficits with spending that we dont need. This is a beginning of a process that people are getting together because they realize this budget issue is getting bigger than all of us just an example of the cooperation going on in the house, that well follow in the senate, were finally going to get a doc fix on paying the doctors under medicare and medicaid. Weve been hiding it under the ponch for all of these years because we didnt want to count it. I think were making progress and id take my hat off to both parties. We have a couple experts on the other side scott lease liesman and andrew here. Maybe all the sides can come together. What would you fix, steve . Tom hard littlehardly need myself advice. I have said i think theyve gone too far. What should they doey. First of all, i dont think the Federal Reserve should be telling banks what their Capital Distribution should be. I think thats like handholding. That the not capitalism. I hate that. I also think they need to ease back on mortgage restrictions. I think they push and pull you when it comes to mortgage lending. Andrew. Im the same. I think the weather stress test dont make sense anymore. The handholding on dividends dont make sense. On the mortgages, that doesnt make sense. I might say there would be lower capital requirements. Are you taking notes, tom . These are things you can appeal to the people youre arguing with now that you know what theyre thinking. Let me just ask everybody there one question. One of the things you raised which im very focused on is the role of the fed. We have for years defended the role of the fed in Monetary Policy and in adjusting and reacting to the financial crisises in this country and around the world. One of my concerns is the fed quietly is becoming the regulator of power of the american Financial System. And reaching out and trying to roll everybody into their purview. And this is a mistake. It will detract, i believe, from the strength of the fed, as the leader of Monetary Policy in the world. And it will create extraordinary problems for men on the him. And in other operations that they dont need. They should think carefully about their next steps. Tom, i would respond that i think part of what the fed is doing at the behest of congress both congress is out there complaining about the fed. But also has charged them with this systemically important charge. And youll recall there was a certain Insurance Company at the center of the financial crisis. And thats one of the reasons why the fed is wrapping these in. Its a charge for the congress. If congress doesnt want this to happen i believe they have the ability to legislate that away. I do believe that congress and the doddfrank rules gave the fed more encouragement. They took that encouragement. And reached out far and wide to gather that and Everything Else they could add to it. Big mistake. Does it weve got to go. Okay. If they just send a note that the fed is overstretched okay. Does the chamber have a favorite republican candidate declared or undeclared, tom . We have wonderful favored republican candidates in both the house and senate. We dont spend a lot of time on the president ial races. We dont go in them. We do get into president ial policy. We will be very encouraged in what theyre proposing. Ill tell you, theres probably 20 people that get up every morning and look into the bathroom and say good morning, mr. President. Good morning, madam president. Its go to be a heck of a time. Thank you. Youre not really moses with ten command meantment commandments, these are guidelines, right . Remember moses dropped the our tablet on the way down the hill. Thats right. Thank you. Thank you very much. Jim cramer is going to join us in a bit. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Lets get down to the new york stock exchange. Jim cramer joins us now. Interesting, we had the oracle on. If i knew in 1960 i could buy an Insurance Company and end up acquiring Something Like a heinz or kraft. That a lifelong thing, isnt not . Yes. First of all, congratulations, anyone interested in business not watching your show, shame on you, that was amazing. The fact theyre putting money into it makes it that they can import money. Thank you, becky about asking questions about the old brands. This is a substantial part of the company that can add the supermarket and change its stripes. No one is going to want chinese ketchup. Were always going to be using heinz products. And kraft needs a refresh. If you look at those brands those are in the pantry. And the pantry doesnt work. Kind of felt like listen a good sale of heinz, now it can work out. Look at those brands. Those brands are all awful brands. They were great 30 years ago. No doubt about it. Youve been going after these brands. General mills when they got out annies. Great time to reconfigure the company with that capital. They will do it. Its a good deal for everybody. It disturbs me that you say pantry. We have a pantry now. I love my pantsry. A big walkin pantry. Jim, people buy around the outside of the markets. Its the inside aisles that the younger are trying to stay away from. Chipotle versus mcdonalds okay . With the why didnt you replace philadelphia cream cheese . I dont know. I never thought anyone could replace hellmans miracle whip. Hampton creek which makes plantbased Natural Organic will replace those eggbased mayonnaise. Its just going to happen. Is it going to happen in two years . Yes. Jim heres the question theyve now paid a premium for this company. When you hear about the talk of 7 billion people do you pay the premium for that . And then also if it becomes a platform to buy more do they end what theyre doughing to do. Thats exactly what theyre going to do. They have the fire power and reinvent the company and this becomes the kol lassa loss sus that offers natural, organic, regular. Phase out the pantry over time a great Transition Company that will be well capitalized. Everybody else better get on the case. These guys can be way ahead. Theyve got the currency which is what you need. How do you play with a hanes . How do you play with General Mills . Campbell, we thought a perennial takeover target as long as ive been covering the m a beat. Campbells bought bolt house, the natural and organic. General mills bought annies for 800 million, their fastest growing. All of the guys ought to consolidate. Consolidation in the industry is amazing. Youre simon from hane, saying, warren warren, love ya, ive been taking share from every one of them. If you are the people at whole foods who run that company, youre saying listen i dont want any of the brands in my stores. I dont want any of them in my stores because theyre the least natural and organic, part of the industrial food bureau and that is not selling in this country. Yeah. Thats the way it is. Well see. Well see if it ever swings back way from that. I like a few preservatives. I dont like things getting rotten. Thanks, jim. Next well get to some other storks making headlines. Remember 1993 baseball classic the sandlot . A few new york yankees decided to recreate a scene and didnt do that bad of a job. The video when we return. [ male announcer ] your love for trading never stops. So if you get a trade idea about, say organic food stocks schwab can help. With a trading specialist just a tap away. Whats on your mind lisa . Id like to talk about a trade idea. Lets hear it. [ male announcer ] see how schwab can help light a way forward. So you can make your move wherever you are. And start working on your next big idea. Welcome back to squawk box. Beyond kraft, other stocks on the move this morning. Heres whats happening. Merck shares getting a boost. The board authorizing additional Share Buyback up to 10 billion. Tesla downgraded. The analysts citing risk to nearterm earnings from lower model x margins. Starwood downgraded from neutral to buy at suntrust analysts pointing to greater exposure to the lumber market. Lumber liquidators trading higher. The safety commercial will hold a call at 10 a. M. Eastern time on the safety concerns raised in the recent 60 minutes segment. Nationstar mortgage under pressure april secondary Stock Offering of 17. 5 million. Lexmark is buying kofax, its 1 billion deal overall. 47 premium. Hertz, received a notice it is out of compliance with the exchanges listing requirements. The reason late filing of its annual report what happen you need to be watching in todays trading session. Some of the new york yankees hitting a social media home run recreating a classic baseball movie. Weve got the details when squawk box returns. Elieve in the power of active management. Our teams collaborate around the world, which leads to better decisions for our clients. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. So whats going on today . News alert message email calendar update most of us admit to being overwhelmed by information at work. Thats why ibm created verse. It uses powerful analytics to uncover hidden patterns in your email, calendars and social feeds. It continuously learns how you work. And helps you prioritize the people and projects you need to focus on. Theres a new way to work and its made with ibm. [piano background music begins] we are one, we are essentially the same regardless of where we come from. Um, there are definitely things that are different about us culturally and Everything Else but at the end of the day we are the same and we really need to start seeing the world as a place that was gifted to us. [thunder and rain] [thunder and rain] [thunder and rain] at mfs, we believe in the power of active management. Our teams collaborate around the world, which leads to better decisions for our clients. Put our global active management expertise to work for you. Mfs. There is no expertise without collaboration. The salten of swat. The colossus of clout. The colossus of clout. Babe ruth. The great bambino oh my god, you mean thats the same guy . Yes i dont feel so good. Members of this years new York Yankees Team recreating the classic the sandlot. Cc sabathia and others creating a buzz on social media. If baseball doesnt work out, maybe get an acting shot. What was that . Let me ask you, you told me you told me five years ago it was the yankees birth right because of their gloated salaries to make it to the playoffs every year and win the world series. When was the last time when was it . Just tell me the last i know its a dynasty okay. All right. Fine. Thats what i thought. All right. Very quickly, lets get to todays watch list. American express is holding an investor day. Ceo ken schenn national will be telling analysts to go from 12 to 15 . Great show, everybody. Well will see you tomorrow. Squawk on the street begins right now. Good morning. Welcome to squawk on the street. Im david faber along with jim cramer live from the new york stock exchange. Carl quintanilla has the day off. Lets give you a look at futures now. As you can see, headed for what looks to be an up open i think, yeah. But you never know that could change, and often does. Crude oil, hows that looking this morning . Yes, sir, it is still well below 50 bucks. But up on the morning than allimportan