Mars to buy Wrigley with Buffett’s backing

Mars would become the world’s largest candy company after buying Wrigley.

CHICAGO (AP) — The Oracle of Omaha is betting that the country’s candy jar is recession-proof.

With financing from Warren Buffett, candy maker Mars Inc. on Monday said it is buying confectioner Wm. Wrigley Jr. Co. for an estimated $23 billion in cash. The deal would marry brands that sweet-toothed Americans have munched on for decades: Mars owns Snickers and M&Ms; Wrigley’s gum brands include Juicy Fruit, Orbit, Extra and Big Red.

“A good time to buy a really great business is when you can do it,” Warren Buffett said on CNBC on Monday, adding that he understands Mars and Wrigley better than the balance sheets of most major banks.

Buffett’s Berkshire Hathaway Inc. will purchase a $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.

“In terms of Warren Buffett’s sweet spot, these are exactly the kind of brands that he wants,” said Jet Hollander, a former candy industry executive who is president of the snack food consulting firm Pre-Eminence Strategy Group.

If the buyout receives regulatory and shareholder approval, the combined companies would leapfrog over Britain’s Cadbury Schweppes as the world’s largest confection maker — a move that’s already fueling speculation that the buyout could spawn a round of candy industry consolidation.

“I look at it as two companies that see the opportunity to create a true global confectionery powerhouse,” said Morningstar analyst Mitchell Corwin. “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. Mars will also assume less than $1 billion of Wrigley debt.

Executives said family-owned Mars first began eyeing Wrigley in January and approached the company with their unsolicited bid April 11. Since then, the two sides have haggled to reach the $80-per- share offer — a 28 percent premium to Wrigley’s Friday closing price of $62.45.

Wrigley shares rose $14.51, or 23.2 percent, to $76.96 in afternoon trading.

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. The Wrigley family will no longer hold any equity in the company.

“I have talked to some family members and I anticipate that they all will be very supportive of this, because it makes sense for really everybody,” said Bill Wrigley Jr., the company’s executive chairman and the fourth-generation family member to lead the business. “It’s not just about selling out for dollars. It is more about what is the right thing and how can we grow going forward.”