Business | Economy
Mars and Berkshire buy out Wrigley
M&M's candy maker Mars Inc. has teamed up with billionaire Warren Buffett to buy Wm Wrigley Jr Co., the world's largest chewing gum maker, for $23 billion, creating the world's largest confectionary company.
- Reuters
- Published: 23:59 April 28, 2008
New York: M&M's candy maker Mars Inc. has teamed up with billionaire Warren Buffett to buy Wm Wrigley Jr Co., the world's largest chewing gum maker, for $23 billion, creating the world's largest confectionary company.
The deal, announced yesterday, will give Buffett's Berkshire Hathaway Inc. a minority stake in Wrigley, which will become a separate Mars subsidiary. Buffett's other food holdings include a stake in Kraft Foods Inc.
Aside from Berkshire, financing for the deal is also being provided by Goldman Sachs and JPMorgan, Mars said in a news release.
At $80 a share, the deal represents a 28 per cent premium over Wrigley's closing stock price of $62.45 on Friday. Wrigley has a market capitalisation of roughly $17.1 billion, according to Reuters Estimates.
"The combined entity would have significant scale and breadth in a very attractive segment of the global food industry," Andrew Wood, analyst at Sanford Bernstein, said in a research note ahead of the formal announcement of the deal.
The combined companies would have a major presence in chocolate, gum and sugary sweets.
While Wrigley is a chewing gum giant, it has faced increasing competition from Cadbury Schweppes Plc's chewing gum business, which includes the Dentyne and Trident brands.
The Mars-Wrigley deal could force Mars rival Hershey Co. and Cadbury into a deal of their own.
The two companies are reported to have talked in the past, though the Hershey Trust, which controls about 78 per cent of Hershey's voting shares, has said Pennsylvania law requires it to maintain control of Hershey.
But some analysts have pointed to Hershey's trust as being a potential obstacle to any such deal. The trust pushed Hershey to put itself up for sale in 2002, but pulled back in the face of pressure from community groups and elected officials.
Back then, Wrigley had made a $12.5 billion bid for Hershey, in an effort to combine its No. 1 position in US gum with Hershey's top spot in US chocolate and candy, but talks fell apart in final stages.
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