As Jim mentions, Buffet’s Berkshire Hathaway is involved in a $23bn deal where Mars is buying Wrigley. Mars is $22bn and Wrigley $5bn in annual sales, so while big this isn’t a huge swallow for Mars, and both companies are well run and run on a brand basis, so merging should be ok.
There are two other things interesting about this deal.
Firstly, while it is no surprise that Wrigley is a classic Buffet company – a massive recession proof brand, we also know that privately held Mars is another. The proposal is for Wrigley to be a subsidiary of Mars while Buffet takes a minority shareholding – $2.1bn worth at a discounted price. Is this a way for Buffet to start playing with Mars? Where could this lead?
Secondly Berkshire Hathaway’s role is to bring (2nd tier) subordinated debt to the table – which is a nice way to raise money in an environment where the traditional funders are running scared. The WSJ mentions that Goldman and JP Morgan are also involved in the financing, but are we going to see more Buffet cash floating around as debt?