Buffett Dips Into Candy Business

http://www.forbes.com/markets/2008/04/28/mars-buffett-update-markets-equity-cx-md-0428markets17.html

Buffett Dips Into Candy Business
Maurna Desmond
04.28.08

Candy is dandy, but gum is getting increasingly profitable.

On Monday, sweets manufactorer Mars and billionaire Warren Buffett confirmed their joint bid for William Wrigley Jr. Co.. The all-cash offer to buy the gum maker is for $80 per share, or $23.0 billion. Wrigley shares surged 23.2%, or $14.48, to $76.93 in midday trading in New York.

The offer represents a premium of 28.0% to Wrigley's Friday closing price of $62.45. The deal is expected to be wrap up in the next six to 12 months.

Buffett's Berkshire Hathaway will provide financing for the deal, and Mars will manage the newly merged company.

Privately-held Mars, the brand behind Snickers and M&M's, is still owned by the Mars family. Thanks to their stake in the candy maker, Forbes estimated the net worth of Forrest Mars Jr., Jacqueline Mars and John Mars at $14 billion each in March.

Breath-sweetening Wrigley has its iconic Doublemint gum, as well as Altoids, Extra and Eclipse. Unlike most other food processors, though, Wrigley's costs aren't increasing substantially. It does not use much in the way of agricultural commodities whose prices are jumping, like wheat, corn, soybean oil and dairy.

Rising commodity prices reacting with this confectionery combination could heat up previously proposed candy company mergers. London-based Cadbury Schweppes and U.S. chocolate company Hershey had discussed the possibility of joining forces. Hershey, already a distributor of Cadbury in the United States, has performed weakly in Europe, where the London-based Cadbury is strongest.

Billionaire Buffett has been on a buying spree in the midst of the current downturn. He bought a chunk of reinsurer Swiss Re, food manufacturer Kraft and pharmeceutical company GlaxoSmithKline.

Though the company is publicly traded, the majority of Wrigley's shares are still controlled by Chicago's Wrigley family, whose name also graces the Chicago Cubs baseball stadium and a well-known Michigan Avenue landmark building.

Reuters contributed to this article.