Warren Buffet, Mars acquire Wrigley for $22 billion

28 April 2008

Mars Inc, the maker of M&M chewing gum and Sticker chocolates, and billionaire investor Warren Buffett have acquired US chewing gum maker Wm Wrigly Jr Company in a $23 billion (£11 billion) deal, that could shake up the confectionery industry worldwide.

Mars, Incorporated, will acquire 100 per cent of Wrigley's outstanding shares and all of its outstanding options will be cashed out.  Mars will pay $80 cash for each share of Common Stock and Class B Common Stock of the Wrigley Company in a transaction valued at approximately $23 billion. Based on Wrigley's closing share price of $62.45 on April 25, 2008, and its three-month weighted average share price of $59.88, this price represents a premium of 28 per cent and 34 per cent, respectively. The terms of the transaction have been unanimously approved by the Wrigley Board of Directors.

This price also represents 4.3 times Wrigley's 2007 net sales and over 35 times Wrigley's 2007 earnings per share. Funding for the transaction includes approximately $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman, Sachs, and $4.4 billion of subordinated debt from Berkshire Hathaway, Inc. At closing, Berkshire Hathaway has committed to purchase a minority equity interest for $2.1 billion in the Wrigley Company subsidiary at a discount to the share price being paid to the stockholders of Wrigley.

"Those of you who know me, know that I have been a big fan of Wrigley's business model for many years, and I love their products," said Warren E. Buffett, chairman and CEO of Berkshire Hathaway. "When you think of a business that's easy to understand, with favorable long-term economics, and able and trustworthy management -- you think of Wrigley. Bringing together these iconic, world-class companies combines Wrigley's strengths with the deep resources and proven brand-building savvy of Mars and will result in a powerful force for innovation and growth in the global confectionery marketplace."

Buffett has also funded other iconic food and beverages companies like Coca-Cola and Sees Candies.

The acquisition creates a confectionery giant and could spur further mergers and acquisitions in the industry. Mars is the world's largest maker of chocolate by sales, commanding a market share of 15 per cent. Wrigley, which generates most of its sales outside the US and has expanded into chocolate and sweets, would bolster Mars's global reach. Controlled by the Mars family of northern Virginia, Mars is one of the last in the confectionery business and is one of the largest family controlled firms in the US.