Backstage with the Mars-Wrigley deal

Allan Sloan is a senior editor-at-large at Fortune

TEXT OF STORY

Scott Jagow: Yahoo and Microsoft aren't hooking up, but Mars and Wrigley are, with a little help from Warren Buffett. We told you last week about this candy deal, but we didn't go that deep into it. That's the job of Fortune magazine's Allan Sloan. Allan, not many deals are getting done in this economic climate. So, how'd this one get done?


Allan Sloan: The way this got done is that Mars, which may have more money than god, is putting up $11 billion, or roughly half of the purchase price, and Buffett's company Berkshire-Hathaway, which has possibly the second largest amount of money after god and Mars, is taking another piece. So, I would call this a leveraged buyout. But the leverage is very low. The gum business, people just love gum. People love the stuff. The cash flow is very predictable. So, it ought to be a lay-up.

Jagow: So, should we read this as a sign that money might be loosening up a bit for deals, or is this is a one-off?

Sloan: I think this a one-off, but that's such a good question I need to chew it over a little bit.

Jagow: You're killing me here! Talking about these companies being so close to the vest, I was reading a story that a few years ago, a kid wrote in to Mars and asked how Milky Way, the candy bar, got its name, and Mars responded that that was classified and confidential information. Why are these companies so close to the vest?

Sloan: Well, Mars is a private company and has always been, I guess I would say, odd. Wrigley is a public company. It's been run by the family forever. I think it's the third or fourth generation, and someone named William Wrigley up until fairly recently was the CEO, and he's young enough to be one of my kids. I mean, I'm surprised they sold. But, it was a very good price. All these things always look good on paper. Right? There is never a deal done that doesn't look good on paper. But in theory, if you combine what Mars does and what Wrigley does, you have a better position dealing with say Wal-Mart, where the stuff is sold, or the big supermarket chains. You know, you have Buffett there blessing the deal and buying a piece of the action. And if Mars wants to grow, I mean, this is an enormous transaction for Mars. This is by far the biggest thing it's ever done.

Jagow: All right, the candy man, Allan Sloane from Fortune magazine. Thanks.

Sloan: Have a sweet day.

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