Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (Photographer: Daniel Acker/Bloomberg)
M&M’s and Skittles are coming together — in one confectionery, that is. Mars said Thursday it is buying out Warren Buffett’s minority stake in Wrigley in order to turn the gum-maker from a
subsidiary and into a fully-integrated part of its operations.
Mars, the world’s largest candy maker, announced Thursday that it is combining its Mars Chocolate and Wrigley segments to create the Mars Wrigley Confectionery. In so doing, Mars is buying out the minority stake in Wrigley that Berkshire Hathaway BRK.B +% has owned since Buffett helped engineer Mars’ $23 billion takeover of Wrigley in 2008.
“We are grateful for the strong and productive partnership we have with Warren Buffett and Berkshire Hathaway. It is a great relationship that has yielded value on both sides,” Mars CEO Grant Reid said in a statement Thursday. “We’re equally pleased that sole ownership of Wrigley provides us with an opportunity to rethink how we simplify our chocolate and Wrigley businesses so that we can bring a more holistic approach to this vibrant category.”
Buffett, for his part, seemed equally pleased by the news that Wrigley will go from Mars subsidiary into a fully-incorporated part of the Mars business.
“I have enjoyed all of Berkshire’s experiences with the Mars family and management and wish them the very best,” Buffett told FORBES in a statement Thursday. “Both Mars and Berkshire have profited from our investment and that’s the way it should be.”
In its most recent quarterly report, Berkshire noted its $2.1 billion preferred stake, carrying an annual 5% dividend, was due up for potential repurchase. The original shareholder agreement allowed for Mars to repurchase half of Berkshire’s stake over 90 days beginning Thursday, and the remaining half in 2021. Mars said Thursday that it has “accelerated the purchase of Berkshire Hathaway’s entire equity interest in Wrigley.
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The new Mars Wrigley Confectionery will have its global hub in Chicago, Illinois, and the new combination will be phased in during 2017, Mars said.
This candy consolidation comes at a challenging time for the confectionery industry: changing consumer palates have turned sugar into a dirty word, and a recent industry report suggested that currency fluctuations would lead to a 7.5% decline in worldwide confectionery sales. Earlier this week, one Wall Street analyst even went as far as to suggest that Nestle — a company that, at least in the U.S., is perhaps best known for its eponymous chocolate bar – consider breaking from its confectionery business, which has seen market share losses and margin deterioration over the last five years.
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