25 March 2015 by lberuti
Overnight 3G Capital Partners and Berkshire Hathaway have offered to merge Kraft Foods Group with HNZ (HJ Heinz Company) to create The Kraft Heinz Co. 3G and Berkshire will own 51% on the new company, while existing Kraft shareholders will get 49% and a $16.5 special dividend. Importantly for the CDS market, no new debt will be issued and the management announced that they are committed to maintaining an investment grade rating going forward. The operation is effectively removing the LBO risk which was overhanging on the food and beverage sector as 3G now appears committed (at least in the medium term). So entire complex traded better today, but the most spectacular move was seen in HNZ’s 5 year CDS which gapped 119bps to 64bps as investors expect it to be a dead box going forward.