Mars, Buffett buying Wrigley for $23 billion

By Brad Dorfman

CHICAGO (Reuters) - M&M's candy maker Mars Inc has teamed up with billionaire Warren Buffett to buy the No. 1 chewing gum manufacturer Wm Wrigley Jr Co (WWY.N: Quote, Profile, Research, Stock Buzz) for $23 billion, creating the world's largest confectionery company.

The deal, announced on Monday, will give Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) a stake of more than 10 percent in Wrigley, which will become a separate Mars subsidiary. Buffett's other food holdings include a stake in Kraft Foods Inc (KFT.N: Quote, Profile, Research, Stock Buzz).

The deal could force Mars rival Hershey Co (HSY.N: Quote, Profile, Research, Stock Buzz) and Britain's Cadbury Schweppes Plc (CBRY.L: Quote, Profile, Research, Stock Buzz) into a deal of their own as they will be faced by a competitor with a stronger geographic base and portfolio of products, analysts said. Cadbury and Hershey are reported to have held talks in the past.

Aside from Berkshire, financing for the Wrigley deal is being provided by Goldman Sachs Group (GS.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), Mars said in a press statement.

At $80 a share, the deal represents a 28 percent premium over Wrigley's closing stock price of $62.45 on Friday. Wrigley closed up 23 percent on the New York Stock Exchange on Monday.

While Wrigley said it was not seeking a takeover, the price was likely too high to ignore, Edward Jones analyst Matt Arnold said.

"I have a hard time explaining it any other way, really," Arnold said. "There was no outstanding reason for them to sell it today except for the price."

Wrigley already traded at 23 times estimated 2009 earnings, the second-highest multiple in the Standard & Poor's U.S. packaged foods index .