Buffett Confects One Sweet Deal

Financier Aids Mars's $23 Billion Bid for Wrigley

Chocolate colossus Mars is buying gum goliath Wm. Wrigley Jr. in a $23 billion, sugar-fueled deal that would create the world's largest candymaker and may reshape the landscape of the global confection industry.

Known sweet-tooth Warren E. Buffett, who owns See's Candies and Dairy Queen and is the largest shareholder of Coca-Cola, helped finance the deal with $6.5 billion from his company, Berkshire Hathaway. The purchase, announced yesterday, has been approved by both boards.

McLean-based Mars -- which had $25 billion in revenue in 2007, up from $18 billion in 2006 -- is paying Chicago-based Wrigley $80 per share in cash, a significant premium over Friday's closing price, $62.45. Shares of Wrigley, which would become a stand-alone subsidiary of privately held Mars and remain in Chicago, soared 23 percent yesterday, closing up $14.46 at $76.91.

It is the third-biggest proposed deal of 2008, trailing Microsoft's $42 billion bid for Yahoo and Swiss pharma-giant Novartis's $28 million try for eye-care company Alcon.

Mars, founded in 1911, makes M&M's, Snickers and Dove Bars, as well as Uncle Ben's rice and pet food lines. It controls about 19 percent of the U.S. candy market, second behind Hershey, said market researcher Euromonitor International, citing 2006 statistics.

Wrigley, founded in 1891, makes Orbit, Life Savers and Altoids mints, along with its namesake chewing gums. Wrigley has 8 percent of the U.S. candy market, Euromonitor said. Combined, the two would pass Hershey with more than 27 percent of the U.S. market.

Mars and Wrigley are both family-controlled companies and have been familiar with each other for years.

"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," Mars Global President Paul S. Michaels said in a statement yesterday.

"The true value of this transaction arises primarily from enhanced growth opportunities, including the potential for cross-pollination of people, ideas and brands, and significant enhancements of sales, marketing and distribution infrastructures," Chairman Bill Wrigley Jr. said in a statement yesterday. He would become executive chairman of his company, reporting to Michaels. In a memo to his company, Wrigley said the combined company will have $27 billion in sales and 64,000 employees.

David Morris, senior analyst with market research firm Mintel, said the deal made sense, especially for Wrigley. Gum sales increased only about 3 percent last year -- "it's a mature industry," Morris said -- and England's Cadbury Schweppes has been making inroads into Wrigley's U.S. gum share.

Morris sees considerable growth for a combined Mars-Wrigley, especially in "harnessing gum as a delivery system for other things, from vitamins to energy," he said.

Analysts speculated yesterday that Hershey, which is owned by a family trust that has long resisted change, would now be forced to heat up long-simmering merger talks with Cadbury to fend off the combined might of Mars and Wrigley.