Chew on this: Mars buys Wrigley
CHICAGO (AP) - April 28, 2008 The agreement announced Monday has the potential to transform
the globe's confectionary industry and could spawn a series of
other combinations.
"First and foremost, this is a great transaction at a great
price that provides tremendous value to Wrigley stockholders,"
Bill Wrigley Jr., chairman of Wrigley's board, said in a statement.
"We see this as an historic opportunity to preserve what is
special about the Wrigley company in terms of values and culture,
while continuing to grow and develop our associates, invest in our
brands and drive long-term generational growth."
Family owned Mars is the world's largest chocolate seller.
If the deal is completed, the combined companies would unseat
Britain's Cadbury Schweppes as the world's largest confection
maker.
"I look at it as two companies that see the opportuntity to
create a true global confectionary powerhouse," said Morningstar
analyst Mitchell Corwin. "Combined, they catapult Cadbury by a
significant margin. They become No. 1 in chocolate and No. 1 in
chewing gum with a strong international presence and growth in
emerging markets."
Under the agreement, shareholders at Chicago-based Wrigley would
receive $80 in cash for each share Wrigley share.
The $80-per share offer is a 28 percent premium to Wrigley's
Friday closing price of $62.45 and the news sent Wrigley's shares
into overdrive in morning trading Monday.
The stock price soared $14.51, or 23.2 percent, to $76.96 in
midday trading Monday after briefly rising to a 52-week high of
$77.75.
After the buyout is completed in six to 12 months, Wrigley would
become a subsidiary of McLean, Va.-based Mars. Its headquarters
will stay in Chicago, where the business has operated since it was
founded by the Wrigley family in 1891.
"When this transaction is completed, we will be proud to
welcome Wrigley's associates to our company," Mars President Paul
S. Michaels said in a statement. "The strong cultural heritage of
two legendary American companies with a shared commitment to
innovation, quality and best-in-class global brands provides a
great basis for this combination."
Warren Buffett's Berkshire Hathaway Inc. will purchase $2.1
billion minority equity interest in the Wrigley subsidiary once the
deal is completed. The Omaha, Neb.-based company also offered $4.4
billion of subordinated debt to fund the deal.
"A good time to buy a really great business is when you can do
it," Warren Buffett said on CNBC Monday, adding that he
understands Mars and Wrigley better than the balance sheets of most
major banks.
Among Wrigley's others brands are Orbit, Extra and Big Red gum
and Altoids mints.
The company's name has been synonymous with Chicago for decades.
The gum maker's ornate towering headquarters along the Chicago
River is a favorite among tourists for snapping pictures. And the
Chicago Cubs historic ballpark - Wrigley Field - got its name while
the team was owned by the Wrigley family, which sold the franchise
decades ago.
Meanwhile Monday, Wrigley said its first-quarter profit rose 18
percent, thanks to strong sales in Eastern Europe and Asia and a
weakened U.S. dollar.
The company earned $168.6 million, or 61 cents per share during
the January-through-March quarter. That's up from $142.7 million,
or 52 cents per share last year. Revenue climbed 16 percent to
$1.45 billion from $1.25 billion last year. Analysts polled by
Thomson Financial expected a profit of 55 cents per share on
revenue of $1.39 billion.
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On the Net:
www.mars.com
www.wrigley.com
