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billion in sales and 14% of the worlds candy market. y It would surpass its rivals, which include Hershey s and Cadbury in the candies segment y It would expand Mars Global reach as Wrigley generates 70% of its sales outside of the US y The deal would expand the product basket of Mars y The deal is backed by a lot of credibility as Buffett is involved y The combination will allow them to invest long term and grow their business giving them a competitive stance y Moreover Wrigley will be run as a separate, stand-alone entity with a high degree of autonomy with no employee cuts. Hence the stakes of the acquisition are not very rigid. y The shareholders will receive a 28% premium over Wrigley s last closing price 2) Mars buying out Wrigley is a case of a acquisition. Merger refers to two companies becoming one. It s the combining of two or more companies, generally by offering the shareholders a stake in the acquiring company. As in this case, acquisition refers to the takeover or buyout of the target companies ownership stakes so that it can assume control of the target firm. Here Mars is buying out Wrigleys for $23 billion. Coming together of these two companies can be classified as product-extension acquisition as these two companies produce and sell different products of a related category. The products of these two companies fall under the candy manufacturing category. 3) Proposed structure of the various entitles post acquisition y Berkshire will buy a $2.1 billion stake in Wrigley division post acquisition y Wrigley will be run as a separate, stand-alone entity with a high degree of autonomy. There will be no employee cuts. y Bill Wrigley Jr. would remain the executive chairman of Wrigley reporting to Paul Michaels, global president of Mars. y Wrigley would become a separate Mars subsidiary. 4) Impact of this M&A for the industry y Mars And Wrigley will control 28% of the US candy market, eclipsing Hershey s 24% share of consumer purchases y Mars will also become the largest candy maker in the world, surpassing Cadbury s 10.1% share y The deal will create a global candy giant with annual sales of $28 billion y It started a trend of using the reverse termination fee
4 Billion debt and $2. Its presence in markets outside USA c. Wrigley Jr. Mars Inc. c. Supported by JP Morgan i. Maximum sales (70%) outside US iii.45 Billion ) d. Right to Mars to walk out of the deal at $1 Billion penalty Mars has fairly priced for the deal. Warren Buffet s trust in the merger and his liking towards Wrigleys business model 7) The valuation aspect of the deal are: a. Cadbury and a global candy giant. Giving two brands to Wrigleys b. Offering $4. it is a very beneficial strategic move and will bring them ahead of their competitors and enjoy large market share. Their involvement/confidence reassured Wrigley of going ahead with the deal d. Also looking at the future aspects of the deal. Co. Berkshire Hathaway (Warren Buffet) i.5) Various aspects that make this deal a standout illustration y The deal was a well contemplated strategic alliance that creates a global candy giant.5 Billion ii.1 billion equity in Wrigleys iii. because Wrigleys bring to the party its brands. Future prospects of having diversified portfolio ranging from candy s to chewing gums. thereby retaining the identity of the brand. . Sharing of manufacturing & Distribution capabilities iv. Protection from competition or other bidders ii. y Buffett s Berkshire Hathaway will make a minority investment which brings it credibility in terms of finances 6) The players involved in the deal a. Goldman Sachs Group Inc. Financial advice to Wrigley and help in negotiation of price iii. e. No cuts in employees and existing management Team v. and also flexibility to write the debts on to the other company. Maximum market share in world and US f. Will help in competitive advantage against Competitors like Hershey. i. Their continuous growth in sale ( First qtr Sales increased by 16% to $1. Largest Chewing gum manufacturer with huge range of successful products ii. Wm. separate Mars subsidiary. Wrigleys existing brand presence and various successful brands b. y It allowed Wrigley to be run as a stand-alone. Offering debt financing of $5. i. Offering a break-up fee of $1 Billion iii. Price offered : $ 80/ Share ( 28% more ) Gross amount: $23 Billion ii. its distribution.
Also. compensating for the losses of the other company involved in the merger.4 = 18. Wrigleys.4.4 Billion $ 2. Our standing to this is that this gives the right to mars to walk away from the business (merger) with no hassles by paying a reverse Breakup fee which is negotiated by William Wrigley. growth in market share etc. Wrigley is going to be a standalone entity.5 2.4 9) Mars to this deal brought the innovation of giving a break-up fee and no explicitly barred performance. This would help them to evaluate the deal. Balance Sheet: Mars Liabilities Term Loans by JP Morgan Amount( $ Billions) 11 Assets Investments Subsidiaries in Wrigley Amount( $ Billions) 23 . will help Mars split its debt thus giving it advantage.7 Billion $ 4. aiding the merger with deficit capital. profitability. .8) Mars is planning to finance this transaction in the following way Source J P Morgan Goldman Sachs Berkshire Hathaway Berkshire Hathaway Amount $ 11 Billion $ 5. b) Break up fee: Certain amount of penalty given by the non-performer in the merger.6 Balance Sheet: Wrigleys Liabilities Term Loans by Goldman Sachs Equity ( Berkshire Hathaway) Amount( $ Billions) 5. Warren Buffet s interest in Wrigley s business model aided the whole process. executive chairman.1 billion.1 Billion Type Debt Debt Debts (Bought) Equity Goldman Sachs advised the Wrigley board and capital offered by them would go to the Wrigleys Balance sheet after closing. c) Reverse break-up fee: Fee paid by the firm to other party involved in the merger by the part who decides to walk out. they proposed to buy out the debts of Wrigleys and also hold equity around $2.1 Assets Cash and bank balance Amount( $ Billions) 4. a) Specific Performance: It means setting up target levels/ expecting certain minimum level of performance in terms of sales.
97 .77 79. Date 08-09-2008 09-09-2008 10-09-2008 11-09-2008 12-09-2008 15-09-2008 16-09-2008 17-09-2008 18-09-2008 19-09-2008 22-09-2008 23-09-2008 24-09-2008 25-09-2008 26-09-2008 29-09-2008 30-09-2008 01-10-2008 02-10-2008 03-10-2008 06-10-2008 Price 79. reaching levels which were not touched before.d) Walk Out: leaving the merger and deciding to undo the decision taken by the two companies because of specific reasons pertaining to that company s management.58 79.45 79.67 79. but it didn t go through) in wake of intensified competition and rising raw material prices.97 on Oct.13 78. Wrigley s stock prices shot up 23% (from $62.50 79.52 79. After that.63 79. 10) After the announcement.45 to $ 76. which is being considered as a good valuation by experts.06 79. the company was taken over by Mars. Mars being a privately owned company is not listed on the stock exchange.45 79. 8 Oct.91). the stock prices of Wrigley s started moving upwards and touched levels never seen before. 11) After the announcement of the Mars. The combined entity is expected to perform well.00 79.00 79. since both the brands are established with ever increasing sales. and the stock was delisted.Wrigley merger.40 79.65 79. The merger occurred on Sept.00 79.58 79. 6. The reason for this surge can be explained due to the fact that this merger would make the combined entity the biggest candy maker in the world (controlling 14% of the world s market with annual sales of $ 27 billion).53 79. 2008 and the final noted price of the stock was %79.53 79. 2008. Mars backed by Berkshire Hathaway and Goldman Sachs Group is paying a handsome amount $80/ share for Wrigley s. 6. The daily traded price of Wrigley s stock from Sept.59 79. The increase in the share prices of Hershey s & Cadbury s is due to the speculation that these entities might go for a merger again (they tried for a merger an year before. 2008.50 79. 25.
Snyder s and Lance shareholders each will own approximately 50 percent of the new company after the merger. The combined entity would have revenues of around 50 billion and would give Kraft an access to Indian markets.5 billion in January 2010. The acquisition of English company Cadbury by Kraft foods for $19. It would be the biggest overseas acquisition by a Chinese company in the food and drink sector. . The combined company will become the world s biggest chocolate maker and the No. Chinese company Bright Food Group is in talks to buy the British food company United Biscuits. which acquired Wrigley two years ago.12) Some of the major developments in the snack and food industry in the recent past are. The merger of snack food maker Lance and Snyder s of Hanover will create a combined company to be called Snyder s-Lance Inc. The combined entity will create a stronger company with the scale to compete in high volume categories. 2 gum producer after privately held Mars.