Mars-Wrigley merger creates world's largest confectionery player

By Linda Rano (29/04/2008)

Leading global confectioners Mars and the Wrigley have announced that they will merge, creating what Bill Wrigley called 'the world's leading confectionery company'.

Both companies have issued statements enthusiastically supporting the merger, which also highlights that they are looking forward to increased growth as a result.

Bill Wrigley said in his letter: "Together , we will be a company with over $27 billion in sales and more than 64,000 associates worldwide. This combined entity will be, among other things, the world's leading confectionery company, with the resources and critical mass to explore new geographies and categories that might have been beyond our reach in the past."

Combining core strengths
In a company statement Wrigley said that the merger combined Wrigley's strengths with the resources and proven brand-building know-how of Mars and will result in "a powerful force for innovation and growth in the confectionery marketplace."

Mars said that the transaction would help the company strengthen and diversify its confectionery business, and enhance its potential for growth in the chocolate, non-chocolate confectionery and gum categories.

The combined company would have "a strong foundation" of established brands in six core growth categories: chocolate, non-chocolate confectionery, gum, food, drinks and petcare. Brands will include M&Ms, Snickers, Mars, Orbit, Extra and Doublemint.

Deal likely to re-ignite Cadbury Schweppes and Hershey talks
According to Reuters the merger is likely to prompt Cadbury Schweppes into re-starting talks with Hersey Co. An Investec Securities analyst is quoted as saying: "Cadbury will have to look at its options and the most obvious is to re-open talks with Hershey over a merger."

Another report: Mars-Wrigley Merger May Cut Costs(30 April 2008)
By Anatoly Medetsky/Staff Writer (Moscow Times)

A merger of confectionery giants Mars and Wrigley could help them cut distribution costs in Russia, where they control a combined six production units, analysts said Tuesday.

Mars and Wrigley agreed to merge in a $23 billion deal that will leave Wrigley a stand-alone subsidiary of Mars, the firms announced Monday. The transaction will create the world's largest confectionery company.

Mars, a maker of confectionery, food and pet-food products, has four factories in Russia, mostly around Moscow. One of them produces chocolate bars in Stupino, 100 kilometers south of the city. Two other Moscow region factories make dog food and cat food in the town of Luzhniki and ready soups in Lukhovitsy. One more factory churns out dog and cat food in Novosibirsk.

Wrigley runs a gum-making plant in St. Petersburg and owns 80 percent in the Odintsovo-based chocolate maker A. Korkunov.

The combined company could "substantially" reduce its spending on distribution and personnel if they operated their warehouses and deliveries from a single center, said Andrei Verkholantsev, an analyst at Atlanta Capital brokerage.

"Labor force costs have been rising if we speak about Russia," he said.

Questions

1. Explain the revenue and cost advantages to Wrigley and Mars from the merger.
2. Assess the impact of the merger on consumers, producers and society as a whole.