US: Mars to buy Wrigley for US$23bn

By just-food.com | 28 April 2008

For more from Wrigley's press conference in Chicago this morning (28 April), click here.

Mars has agreed to buy confectionery rival Wrigley in a deal worth US$23bn, the companies have announced today (28 April).

The deal has been part-funded by investment fund Berkshire Hathaway, run by billionaire investor Warren Buffett, which has put up $4.4bn.

The transaction will see two of the world's largest confectioners come together and create a business generating $27bn in annual sales.

Wrigley will remain a stand-alone business headquartered in Chicago and Mars will transfer its non-chocolate sugar brands, including Starburst and Skittles, to the gum giant's portfolio.

Wrigley chairman Bill Wrigley said the $80-a-share deal represented "tremendous value" for the company's shareholders.

He added that a combination with Mars gave the 117-year-old company an "historic opportunity" to grow the business.

"In terms of Wrigley's ongoing business, the true value of this transaction arises primarily from enhanced growth opportunities, including the potential for cross-pollination of people, ideas and brands, and significant enhancements of sales, marketing and distribution infrastructures," Wrigley said.

Mars Global president Paul Michaels added: "This is not about being bigger - it's about being the best, and providing leadership and innovation across the full range of confectionery categories."

Buffet said he had been "a big fan" of Wrigley and said the enlarged business would be "a powerful force for innovation and growth in the global confectionery marketplace".

The deal is expected to close within the next six to 12 months.

Sectors: Bakery, Confectionery, Snacks

Companies: Wrigley, Mars

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US: Mars to buy Wrigley for US$23bn

There is currently 1 comment on this article

The first point to make is that the deal will definitely go ahead, unchallenged.

Mars and Wrigley clearly both want it and are not too dissimilar culturally, in terms of their family and US roots. Very complementary. Naturally, Wrigley has to operate on a stand-alone basis (just like Royal Canin in France) as a full integration and adoption of the Mars salary structures would have killed the deal financially.

Who is there to stop it?
Hershey? No, bad timing and chewing gum is not sufficiently core to persuade the Trust to change the habits of a lifetime and risk that sum of money.
Cadbury? They wish, but anti-trust authorities would step in.
Nestle? They don't need chewing gum and they have other priorities in that area (ie. chocolate). They don't do bidding wars and they don't do hostile takeovers.
Kraft? It would make another interesting diversionary tactic but, no, they have too much to fix in the core business. (Is there a core business?)
Ferrero? No way!
Did I miss anyone?

But one consequence might be the otherwise unimaginable merger of Cadbury and Hershey. Both are medium-sized players, globally speaking. Cadbury needs some help in the US and Hershey needs a lot of help getting out of the US. The new Mars-Wrigley combo might panic both of them sufficiently to force a shotgun wedding... (Sorry, the best metaphor I could find). I would do a regular check of all hotels in the Pennsylvania area over the coming months for the name Stitzer...

 

TheFoodAnalyst.com said at 8:19 pm, April 28, 2008

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