THISISMONEY.CO.UK: Pressure on Cadbury as Buffett eyes Wrigley

Simon English, Evening Standard, Thisismoney.co.uk
28 April 2008, 9:41am

Warren Buffett and Mars are poised to take over chewing gum giant Wrigley in an £11bn deal that has profound implications for UK chocolate business Cadbury Schweppes.

Chewing it over: Buffett would provide some of the financing for Mars to take over Wrigley and become a shareholder himself.

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The deal that sees the world's richest man and the iconic maker of Snickers bars link-up could be unveiled today, and will have managers at Cadbury scurrying for details.l

Cadbury bought American chewing gum maker Adams in 2003 for £2.7bn and has been pushing its Trident brand in the UK in an attempt to break the stranglehold Wrigley has on the market.

Wrigley, a family dynasty just like Mars, has more than 35% of the gum market in the UK, with Cadbury second at 25%.

The arrival of new Wrigley owners with such deep pockets could spark more corporate activity at Cadbury, which is in the process of splitting off its beverages arm.

Analysts say it could now look to merge with US chocolate maker Hershey in response, a deal that was discussed as recently as a year ago.

Buffett has long admired both Mars and Wrigley, businesses he regards as powerful brands with a staying power to match Gillette or Coca-Cola.

Although the terms of the deal are not yet public, it is expected Buffett will provide part of the financing for Mars, becoming a shareholder in the new business.

Buffett is clearly prepared to pay a significant premium to get his hands on the company - Wrigley has a stock market value of £8.5bn. He recently eclipsed Bill Gates as the richest man in the world with a personal fortune put at $62bn by Forbes magazine.

Mars is an intensely private company founded in Virginia. Company patriarch Forrest Mars died in 1999 at the age of 95, prompting speculation it could be sold to Nestlé.

Wrigley is a Chicago-based firm that has been selling gum since 1893. Its brands include Juicy Fruit and Freshmint. Cadbury became convinced a few years ago that it could take on Wrigley, pushing chewing gum's status as a health food that can be good for teeth. Despite its efforts, gum sales in the UK have been falling, a development Cadbury sees as an opportunity given Wrigely's dominance of the market.

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