Replies to post #6538 on The Rising Influence of Rising Affluence

[DewDiligence]

LOL—Credit Suisse just raised the target price on HNZ to $72.50. I’m not joking.

[DewDiligence]

Additional color on the HNZ buyout from DealBook:

http://dealbook.nytimes.com/2013/02/14/berkshire-and-3g-capital-to-buy-heinz-for-23-billion

p.s. Hedge-fund operator and HNZ director, Nelson Peltz sold several hundred million dollars of HNZ stock during the past 1.5 years; he made a nice profit but missed the big bang at the end.

[acgood]

Hope the institution doesn't decide to cut out the middle man and just load up on BRK ;)

[DewDiligence]

HNZ update—The stock was trading within a few pennies of the $72.50 buyout price until last Thursday, when it went ex-dividend and hence declined by roughly the amount of the $0.515 quarterly dividend.

Whether there will be another dividend payment before the buyout closes is in doubt. HNZ’s initial SEC filings about the buyout said that the closing was expected in 3Q13 (in which case a second 2013 dividend would surely be paid); however, HNZ’s latest SEC filings say the closing will be in 3Q13 or late in 2Q13.

Hence, the discount of the current market price ($71.99) to the $72.50 buyout price is not your typical arb spread based on risk that the deal will fall through, but rather reflects uncertainty that the 2Q13 dividend of $0.515 will be paid. If it were certain that the 2Q13 dividend would be paid, HNZ would now be trading at or slightly above the buyout price. In effect, HNZ shares have become a proxy for an almost-risk-free bond where the interest rate is either 3% or 6% depending on whether the 2Q13 dividend gets paid.

[DewDiligence]

HNZ shareholders approve $72.50 cash buyout as expected:

http://www.sec.gov/Archives/edgar/data/46640/000095010313002702/dp37930_ex9901.htm

It is still not known whether the deal will close in 2Q13 or 3Q13; the pertinent distinction is that a 3Q13 closing implies that shareholders will receive one more dividend payment of $0.505/sh in addition to the $72.50 for a total consideration of $73.005.

[DewDiligence]

Heinz used to be a great company—KHC not so much:

https://www.wsj.com/articles/kraft-heinz-cuts-prices-denting-profit-1541106297

A sharp decline in Kraft Heinz Co.’ profit showed that the food maker is struggling to grow sales without hurting margins, sending shares down 7% after hours.

Chief Executive Bernardo Hees said spending on hiring, marketing and new products weighed on its third-quarter results. Kraft Heinz’s preferred measure of profitability fell 14.4% to $1.6 billion.