Warren Buffett and Mars Inc To Buy Wrigley

On Monday September 7, 2009, privately held candy maker Mars Inc, and Warren Buffett’s Berkshire Hathaway (BRK.A / BRK.B) have offered to buy the Wm Wrigley Jr Co (WWY) for $23B.  Wrigley is the world’s largest chewing gum maker.  This will make Mars Inc, the maker of M&M, Snickers, and Twix candies into the world’s largest confectionery company.

The deal will give Berkshire Hathaway a minority stake in Wrigley for helping to finance the deal.  Goldman Sachs and JPMorgan will also provide additional financing.  Mars will pay $80 a share, which represents a 28% premium over Wrigley’s closing price of $62.45 on Friday (9/4/2009).  Wrigley will then operate as a separate Mars subsidiary.

Wrigley’s brands which include Juicy-Fruit, Big Red, Hubba Bubba, Starburst, Doublemint, Skittles, and Extra have faced increasing competition from other confectionery manufacturers such as Cadbury PLC’s (CBY) Dentyne and Trident (formerly Cadbury Schweppes PLC).
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Interestingly, Kraft Foods Inc (KFT), another food holding in which Berkshire Hathaway has a large stake in, announced today (9/7/2009) that it has offered to buy Cadbury PLC  for $16.66B (USD).  However, Britain’s Cadbury has rejected the bid, citing that Kraft’s approach fundamentally undervalued the company.  Kraft offered 300 pence in cash and 0.2589 new Kraft shares per Cadbury share, which represents a 31% premium to Cadbury’s closing share price of 568 pence on Friday (9/4/2009).   Based on Kraft’s Friday closing price of $28.10, and a sterling exchange rate of $1.6346 USD, the offer values each Cadbury share at 745 pence, and the company at 10.2B pounds or $16.66B.

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