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Issue Date: Vol. 48, No. 4, April 2008, Posted On: 4/28/2008

Wrigley And Mars Pact To Merge

by Staff Reporter
Tags: Wrigley, Wm. Wrigley Jr. Co., Mars Inc., confection

CHICAGO — The Wm. Wrigley Jr. Co. today announced that it has reached an agreement to merge with Mars Inc. in a deal that would unite two of the world's leading confectionery companies. Mars Inc. has agreed to pay $80 cash for each Wrigley share in a transaction valued at approximately $23 billion.

Through the transaction, Wrigley will be a separate, standalone unit of Mars, a private, family-owned company since 1911, and maintain its headquarters in Chicago. Bill Wrigley Jr. will continue serving as the company's executive chairman. The combined organization will have a product portfolio containing some of the world's most recognizable confectionery brands - including Orbit, Extra, Doublemint, M&Ms, Snickers and Mars - as well as Mars's leading food, beverage and pet care brands, totaling over $27 billion in global sales.

Founded in 1891, Wm. Wrigley Jr. Co. is a recognized leader in confections with a wide range of product offerings including gum, mints, hard and chewy candies, lollipops and chocolate that are distributed in more than 180 countries. As part of the transaction, Mars's non-chocolate sugar brands - including Starburst and Skittles - will be added to Wrigley's confectionery portfolio, joining such well-known brands as Lifesavers and Altoids. (Wrigley purchased the latter two brands in 2005 from Kraft for $1.5 billion.)

The Wrigley board of directors has unanimously approved terms of the transaction. Funding includes approximately $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs, and $4.4 billion of subordinated debt from Berkshire Hathaway Inc. At closing, Warren Buffet's Berkshire Hathaway has committed to purchase a minority equity interest for $2.1 billion in the Wrigley Co. subsidiary at a discount to the share price being paid to the stockholders of Wrigley.

According to industry observers, the Mars-Wrigley deal could spark further consolidation in the global candy business. One possible result: Hershey Co. and Cadbury Schweppes PLC could be forced to merge. The two discussed a deal last year. And Cadbury's split off of its beverage division in May is seen as paving the way for deal.

Separately, Wrigley reported first-quarter sales records of $1.45 billion, up 16% for the period ended March 31 from the year-ago quarter. Net earnings of $169 million climbed nearly 18% from the first quarter of 2007. According to Wrigley, the positive impact of currency, due to translation of international sales into a relatively weaker U.S. dollar, accounted for approximately half of the increase. The balance of the gain was due to a combination of pricing and product mix and a 1% growth in shipments.

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