Kraft Heinz Offer For Unilever Already Paying Dividends For Hedge Funds

Feb 17 2017 | 10:55pm ET

Kraft Heinz’s $143 billion offer for rival Unilever on Friday has already proven fruitful for hedge funds holding long positions in the consumer products companies. 

Approximately 23 hedge funds held a combined 1.2% of Kraft as of Wednesday, according to a Reuters article. Friday, the company’s shares rose by $9.30, or more than 10%, to a new record high of $96.65. 

Multi-manager firms Millennium Management, Citadel and Balyasny Asset Management were among those holding the stock, Reuters Eikon data shows, although information about cost basis or strategy is not known. Nonetheless, share volumes in the two companies have exploded, with Kraft trading more than 30 million shares on Friday compared to its daily average of 2.8 million shares and Unilever’s volume skyrocketing from an average of 2 million shares per day to more than 37 million. 

Unilever’s share price rose 14% on Friday to reach $48.53, also a new record and slightly below the $50 per share offer from Kraft. It has already been publicly rejected by Unilever, but a sweetened deal from Kraft, whose largest investor is Berkshire  Hathaway’s Warren Buffett, seems likely and must come within a month under U.K. regulations. Accordingly, event-driven hedge funds were thought to be shorting Kraft and going long Unilever heading into Friday’s close. 

Other hedge funds that listed Kraft Heinz on 13F regulatory filings at the end of last year include Caxton Associates, BlackRock, Adage Capital Management, Weiss Multi-Strategy Advisers and LMR Partners.  

Kraft Heinz is backed by private equity company 3G Capital, which combined Kraft and H.J. Heinz in a $45 billion deal back in early 2015. The company has become known for debt-heavy mergers accompanied by relentless pressure to lower costs.

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