Buffett backs sweet deal as Mars to buy Wrigley for $23B

Tuesday, April 29, 2008 at 1:45am

Mars Inc., backed by billionaire Warren Buffett, agreed Monday to buy Wm. Wrigley Jr. Co. for $23 billion to create the world’s biggest candy maker.

Wrigley surged 23 percent in New York trading yesterday after the companies said Mars would pay $80 for each of the gum maker’s shares, with Buffett’s Berkshire Hathaway Inc. providing part of the financing. Mars is offering 28 percent more than Chicago-based Wrigley’s closing price on April 25.

The combined company will have $27 billion in annual sales and 14 percent of the world’s candy market. Buffett will get more than 10 percent of Mars’s Wrigley unit.

Mars, the maker of M&Ms and Snickers, will add its Starburst and Skittles candies to 117-year-old Wrigley’s Lifesavers and Altoids brands.

“It’s a great price,” said Thomas Burnett, director of research at New York-based Wall Street Access. “Nobody is going to pay more than that. Who is going to go up against Mars and Buffett? He doesn’t own shares of Wrigley or Berkshire.”

Mars and Wrigley together will control almost 28 percent of the U.S. candy market, eclipsing Hershey Co.’s 24 percent share of consumer purchases, according to Euromonitor International Inc. in Chicago, citing 2006 sales. It will also become the largest candy maker in the world, surpassing Cadbury Schweppes Plc’s 10.1 percent share.

The purchase will be financed with $11 billion from Mars, $4.4 billion from Berkshire and $5.7 billion from Goldman Sachs Group Inc. Berkshire will also buy a $2.1 billion stake in the Wrigley division once the purchase is completed.

“There’s really nothing that can go wrong with something like the Wrigley and Mars brands,” said Buffett, 77, Berkshire’s billionaire chief executive officer, yesterday. “People are eating more and more of their products every day.”

Berkshire also owns See’s Candies, an 87-year-old confectioner in San Francisco, which had sales of $383 million in 2007, Buffett said in his annual letter to shareholders. Mars has annual revenue of $22 billion while Wrigley’s sales were $5.39 billion last year.

— Bloomberg News

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By: breathofdeath on 12/31/69 at 6:00

The Wrigley's historically been known for providing excellent gum products and lousy baseball teams. I sure hope they don't try to buy back the Cubs!