Wrigley chews over $23bn Mars bid

The confectionery world holds its breath, as Mars and Warren Buffett submit a blockbuster bid for Wrigley...

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Last Updated: 06 Nov 2012

Confectionery giant Mars has agreed to pay $23bn for US gum-maker Wrigley, with Buffett’s Berkshire Hathaway vehicle lined up to provide some of the funds (and eventually take a minority stake in Wrigley). The deal will create an industry behemoth with combined sales of about $27bn – so it could spark a string of other tie-ups in the sector as rivals try to compete.

The Mars/ Buffett bid has already been approved by the board (the Wrigley family called it a 'great transaction at a great price') but still needs to be ratified by shareholders. But the offer on the table should help to persaude them - a bid of $23bn represents a premium of nearly 30% on Wrigley’s closing share price last Friday, so Mars is clearly very keen to get a deal done as quickly and painlessly as possible. Evidently some of its top brass have spent the weekend doing a lot more working than resting and playing...

If a deal does goes through, it would see two of the oldest family businesses in the US join forces. Wrigley, the owner of Juicy Fruit and Extra gum, was run by the eponymous family from its foundation in 1891 until two years ago, while the executive reins at Mars were also in family hands until the recent retirement of John Mars (now chairman). However, they have rather different approaches to publicity. Whereas Wrigley has been a public company since the 1920s, Mars remains famously secretive – the company is still wholly family-owned and provides hardly any information about its inner workings.

Since Buffett is usually an advocate of greater transparency, any deal with Mars would seem at first sight to be a rather curious marriage. On the other hand, Wrigley does look like a classic Buffett investment. The so-called ‘Sage of Ohama’ likes well-known consumer brands with big market share (he’s already a major shareholder in Coca-Cola), so it’s no surprise that he wants in.

For Mars, the tie-up with Wrigley means a chance to extend its global footprint. It’s already the world’s biggest chocolate maker – buying Wrigley would also make it the market leader in chewing gum, which is still selling strongly around the world. In fact, it’s been one of the main money-spinners for Cadbury in recent years – so the Bournville-based sweet-maker will be looking on nervously today. Its plan to take on Wrigley will get a lot more difficult with Mars lined up on the other side...

In fact, industry observers are already speculating that a Mars-Wrigley deal would force Cadbury to seek an alliance with another rival – probably Hershey, with whom it’s been flirting coquettishly for years. Otherwise it could find itself in a very sticky situation...

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