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Mark Lennihan/AP

Mars–Wrigley Merger Finalized

October 07, 2008 03:28 PM
by Anne Szustek
Wm. Wrigley Jr. Co., the manufacturer of such chewing gum brands as Orbit and Juicy Fruit, now is officially a subsidiary of privately owned candy conglomerate Mars Inc.

Mars Buys Into Orbit

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Wrigley, the brand behind such Chicago landmarks as Michigan Avenue’s Wrigley Building and the onetime owner of the Chicago Cubs and their iconic ballpark Wrigley Field, is under the umbrella of family owned company Mars Inc. as of Monday.

Mars’ $23 billion buyout of Wrigley was first announced in April and was approved on Sept. 25 at a special meeting of Wrigley shareholders. Together, Mars and Wrigley are the world’s largest candy maker, edging out British brand Cadbury’s PLC. Last year Mars, established in 1911, reported more than $22 million in revenues. Wrigley posted $5.39 billion in revenue.

Wrigley, founded in 1891, itself was under family control, but unlike Mars, it traded publicly. Holders of Wrigley common stock are to receive $80 per share, just above the gum manufacturer’s final closing price on Monday of $79.97. As of closing Monday, Wrigley shares will no longer be traded on the New York and Chicago stock exchanges.

Wrigley executive chairman Bill Wrigley Jr. said in a statement, “Becoming part of Mars opens up a world of opportunity for the expansion of our brands, the growth of our business, and the development of our associates.”

As a subsidiary of Mars, Wrigley’s headquarters will remain in Chicago. The company is taking over production responsibility of Mars brands Skittles and Starburst, as well as candy factories in Australia, Mexico and the Czech Republic.

Background: Another Buffett-backed deal

First announced on April 28, the Wrigley-Mars merger was considered a sweet deal for the gum manufacturer. The $23 billion sale price, working out to $80 per share, marked a 30 percent price per share premium over the price at which Wrigley stock was trading late the previous week.

The deal is being funded in large part by investment authority Warren Buffett’s conglomerate, Berkshire Hathaway, which committed $4.4 billion in subordinated debt, as well as buying a $2.1 billion minority stake. Goldman Sachs agreed to put up $5.7 billion in committed senior debt to the deal, in addition to serving as the merger’s financial adviser. Mars committed $11 billion for its part.

Buffett was quoted as saying in M&A publication Mergers Unleashed, “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 confectionary marketplace.”

The Mars-Wrigley deal is the latest to tap into Buffett’s vast liquidity amid a deepening credit crunch. Late last month, Goldman Sachs, Buffett’s fellow debt-holder in the candy deal, had $5 billion in its preferred stock bought up by the financier, plus an option to buy an additional $5 billion in common stock at 8 percent below the previous day’s closing price. And last week, much at Goldman’s behest, Buffett bought up $3 billion in General Electric preferred stock with a 100 percent warrant coverage for an equal amount in common stock. GE then leveraged the news to sell $12 billion of common stock in a separate public offering, albeit at a 7 percent discount to the previous market price.

Other recent Buffett-backed mergers include $3 billion toward the $18.8 billion buyout of specialty chemical firm Rohm & Haas by Dow Chemical. During 2007, Berkshire Hathaway was buying up shares of Kraft Foods, holding 8.6 percent of the company by the end of the year. Berkshire also had sizable stakes in pharmaceuticals company GlaxoSmithKline, Procter & Gamble, Anheuser-Busch, U.S. Bancorp and The Coca-Cola Co. as of end-year 2007.
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