Tuesday, April 29, 2008

Shares of Gum Maker Wm Wrigley Regains Flavor!

Wm Wrigley Jr Co (WWY-$76.91) had some Winterfresh news for investors Monday, announcing candy maker Mars Inc, the closely held company behind Milky Way and Snickers chocolate bars and M&M's , agreed to buy it for $80 a share , or about $23 billion, with the backing of Warren Buffett’s Berkshire Hathaway.

We are not expecting a rival bid to Eclipse the offer on the table, for Mars’ is paying a rich 32.2 forward 12-month EPS multiple for the chewing gum maker.

The combined entity creates the world's leading confectionery, with more than $27 billion in sales.

Wrigley's Board of Directors unanimously approved the terms of the deal, led by its Chairman, Bill Wrigley Jr, the great-grandson of the founder.

"First and foremost, this is a great transaction at a great price that provides tremendous value to Wrigley stockholders," noted Mr. Wrigley, Jr.

Of couse it does! He and/or members of his family (over which he acts as trustee) beneficially own 45 percent of the voting stock, and stand to walk away with about $2.72 billion!

Following the change in control—expected in six to nine months—the 10Q Detective does not believe the top five Named Executive Officers will be retained by Mars—save for Wrigley (who will probably have no more than a titular role to play after the merger). Wrigley stepped down as CEO in 2006.

As the table below shows, each of the Company’s named executive officers will float away on golden parachutes, accorded to the proxy statement filed with the SEC in February 2008. (The disclosed severance packages discount the actual amounts to be received, too, for share grants and options are based on a closing price of $57.96 a share, the closing price on December 31, 2007.)

Oh-me, oh-my, oh-you
Whatever shall I do
Hallelujah, the question is peculiar
I'd give a lot of dough
If only I could know
The answer to my question
Is it yes or is it no

The proposed deal—for a change—aligns the interests of insiders and common stockholders alike. Lingering concern of too much inventory at retailers/distributors has depressed the share price of the stick gum maker for the past ten-months. The $80-a-share cash offer is a Life Saver, representing a 28 percent premium to Wrigley’s closing share price on Friday.

Does your chewing gum lose its flavour
On the bedpost overnight
If your mother says don't chew it
Do you swallow it in spite
Can you catch it on your tonsils
Can you heave it left and right
Does your chewing gum lose its flavour
On the bedpost overnight
~ Singer Lonnie Donegan (1931 – 2002)

We say Hubba Bubba. The chewing gum "on the bedpost" finally has some taste!.

Editor David J. Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.


Alan Evil said...

All Wrigley gum is now made with aspartame. The first thing Mars did was take an almost century old recipe and ruin it with poison. I hope people realize the new product tastes like crap and quit chewing it.

Team said...

I have been chewing gum for 60 years and I HATE that new receipe of Wrigley Gum. Bring back the old classic!