Warren Buffett is getting plenty of plaudits this morning for teaming up with Mars to buy Wm. Wrigley Jr. for $23 billion. (Not entirely surprising. He is, after all, the “Oracle of Omaha and has a pretty good track record.)
The FT.com’s FT Alphaville blog writes that Wrigley would seem to fit the classic value investor theory–a strong brand, with a strong market share, “but which happens to be out of fashion and available at less than their intrinsic value.”
So what does this deal have in common with a certain consumer product deal three years ago? A lot, according to Bob Reed over at Reed Biz. Reed writes that while we see a couple of candy companies getting together, “Warren Buffett sees a replay of the Procter & Gamble and Gillette merger.”
In both deals the products were complimentary. P&G didn’t have a razor business. Mars’ focus is on chocolate, while Wrigley mostly makes gum. Perhaps more importantly, both deals strengthen the combined firm’s international distribution network, Reed points out.
For Wrigley investors, the $80-a-share offer marks a healthy 28% premium over Friday’s close, and as Crossing Wall Street points out: “Twenty-five years ago, shares of WWY were going for about $1. That’s a nice 80-fold return in 25 years, and that doesn’t include a consistently rising dividend. Given Wrigley’s business, it’s probably no surprise that Berkshire Hathaway will be in the deal, providing financing for the purchase.”
Meanwhile, over at footnoted.org, Michelle Leder wonders “what role a string of increasingly testy comment letters between [Wrigley] and the SEC had in pushing Wrigley to go private.”
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