MCLEAN, Va. & CHICAGO -- Mars Inc. has announced a merger agreement with Wm. Wrigley Jr. Co. in a transaction valued at approximately $23 billion. Under the terms of the agreement, as reported in a CSP Daily News Flash yesterday, Wrigley will become a separate, standalone subsidiary of Mars. With $5.4 billion in sales, Wrigley is a world leader in gum and confections.
Warren Buffett's Berkshire Hathaway Inc., along with Goldman Sachs and JPMorgan, is providing financing for the transaction. At closing, Omaha-based Berkshire Hathaway will make a minority equity investment in the Wrigley [image-nocss] subsidiary.
The transaction builds the Mars business by strengthening and diversifying its confectionery business, and enhancing its potential for growth in the chocolate, nonchocolate confectionery and gum categories. To provide more focus to McLean, Va.-based Mars' brands and drive growth, the company will be transferring its global nonchocolate confectionery sugar brands, including Starburst and Skittles, to Wrigley.
Following completion of the transaction, Bill Wrigley Jr. will remain executive chairman of Chicago-based Wrigley, reporting to Paul S. Michaels. He will work closely with Bill Perez, president and CEO, and the current Wrigley management team.
"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," said Paul S. Michaels, global president of Mars, McLean, Va.
"In terms of Wrigley's ongoing business, 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. We see this as an historic opportunity to preserve what is special about the Wrigley Co. in terms of values and culture, while continuing to grow and develop our associates, invest in our brands and drive long-term generational growth," said Bill Wrigley Jr.
"This combination brings together two strong, complementary confectionery organizations," said Perez. "As a standalone subsidiary of Mars, with our strong, global leadership team in place, we will have the opportunity to accelerate our already strong growth trajectory."
Wrigley will remain in Chicago, the companies said.
The combined company would have a strong foundation of established brands in six core growth categories—chocolate, nonchocolate confectionery, gum, food, drinks and petcare—including M&M's, Snickers, Dove, Mars, Orbit, Extra, Doublemint, Uncle Ben's, Pedigree, Whiskas, Royal Canin and Banfield. Other Wrigley brands include Wrigley's Spearmint, Juicy Fruit, Altoids, Life Savers, Big Red, Boomer, Pim Pom, Winterfresh, Freedent, Hubba Bubba, Excel, Creme Savers, Eclipse, Airwaves, Solano, Sugus, P.K., Cool Air and 5.
The transaction is fully underwritten and not subject to financing conditions. The transaction is subject to customary closing conditions, including approval by Wrigley stockholders and certain governmental and agency regulatory clearances. Both parties hope to close the transaction within six to 12 months.
Funding for the transaction 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. At closing, Berkshire Hathaway has committed to purchase a minority equity interest for $2.1 billion in the Wrigley subsidiary at a discount to the share price being paid to the stockholders of Wrigley.
"Those of you who know me, know that I have been a big fan of Wrigley's business model for many years, and I love their products," said Buffett. "When you think of a business that's easy to understand, with favorable long-term economics, and able and trustworthy management—you think of Wrigley. Bringing together these iconic, world-class companies combines Wrigley's strengths with the deep resources and proven brand-building savvy of Mars and will result in a powerful force for innovation and growth in the global confectionery marketplace."
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