NEW YORK (Reuters) - Standard & Poor's on Monday said it may cut No. 1 chewing gum manufacturer Wm Wrigley Jr Co's (WWY.N: Quote, Profile, Research) ratings because its acquisition by Mars Inc will increase its debt and may weaken credit quality.
M&M's candy maker Mars Inc has teamed up with billionaire Warren Buffett to buy Wrigley for $23 billion, creating the world's largest confectionery company.
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 Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research), the rating agency said.
"Given the expected increase in debt associated with this transaction, we believe Wrigley's credit measures will weaken from currently strong levels," the rating agency said in a release.
Chicago-based Wrigley had $1.2 billion of total debt outstanding at the end of March, S&P said.
S&P placed Wrigley's corporate rating of "A-plus" and its "A-1" commercial paper rating on review with "negative implications." The rating agency said this means it may cut or affirm these ratings after its review.
S&P said it will review the company's capital structure, operating plans and future financial policy with management before it makes a decision on ratings.
The deal will give Berkshire Hathaway a minority stake in Wrigley, which will become a separate Mars subsidiary. The transaction is subject to regulatory approval and is expected to close within six to 12 months.
(Reporting by Anastasija Johnson; Editing by Diane Craft)Visit Share Investor Blog