Unstructured Finance

Warren Wonka the Candyman?

Warren Buffett knows sweets. His Berkshire Hathaway is the largest shareholder in Kraft Foods, which made an unsolicited — and rebuffed — $16 billion bid for Cadbury. The Wall Street Journal reported that the trust that holds voting control of Hershey has hired Buffett’s favorite banker, Byron Trott, as it also weighs whether to pursue the British chocolate maker.

Trott, a former Goldman Sachs banker who runs his own firm now, is known for his expertise in candy as well as in advising family- and trust-owned companies. He convinced Buffett to pay $6.5 billion to help finance Mars in its $23 billion takeover of Wrigley last year.

Paritosh Bansal and Jessica Hall report that while Trott’s latest engagement may not have anything to do with Buffett, he may end up helping the billionaire investor. Sources previously told Reuters Hershey is unlikely to make a bid on its own for all of Cadbury. But Hershey may want to pick up pieces of Cadbury, which makes Dairy Milk chocolate, Halls cough drops and Trident gum. This could bode well for Buffett, some investors said.

Cadbury shareholders could get better value and Kraft may not have to pay up for a deal if a third party values some pieces of the British company more than what it is worth in its entirety to Kraft, these experts said.

Buffett has made no secret of his worry that Kraft may overpay for Cadbury. On Wednesday, he told CNBC that Kraft had “a lot to do” to justify the price offered for Cadbury. He also said investors undervalued Kraft’s stock, so it was using a weak currency to pay full value for Cadbury.

Simply, Buffett

Warren BuffettWhat’s one of Warren Buffett’s advantages in this environment, when credit is tight, markets are in disarray and deals are so difficult to do?

Simplicity, apparently.

The famed investor gave a financing commitment letter that was just two-and-a-half pages long in the Mars-Wrigley deal, said Timothy Ingrassia, Goldman Sachs’s head of mergers in Americas.

Compare that to deal contracts that average about 90 pages these days and commitment papers that run into hundreds of pages, Ingrassia said during a panel discussion at a Practising Law Institute seminar on M&A in New York.

The “M” must stand for Money

m.jpgWalk down the chocolate aisle in a grocery store, and the premium names leap out at you: Lindt, Ghirardelli, M&M’s.
That’s right, M&M’s. Mars Snackfood U.S. is using the M&M’s brand — a well-known mass candy brand — to launch a new entry in the fast-growing premium chocolate market.
Dove is usually the Mars brand most associated with premium chocolate. M&M’s are more known as the candy that doesn’t get kids’ hands messy, because it melts in their mouths.
But Mars said that this summer it is launching M&M’s Premiums, a take on traditional M&M’s with a thinner candy shell and flavors like mocha and raspberry almond … not exactly kid’s stuff.
The price isn’t exactly for kids, either. A six-ounce package will be priced at $3.99, or 66.5 cents an ounce. In contrast, a 1.69-ounce bag of standard M&M’s costs 79 cents, or 46.7 cents an ounce, according to Mars.
The premium chocolate segment has well outpaced growth in regular chocolate in the United States.
But tell us, is a premium M&M what you are looking for?
And speaking of what consumers may or may not be looking for, how about chewing gum made with tree bark extract.
Wrigley, which is being bought by Mars, is including magnolia bark extract in its Eclipse gum and mint, which Wrigley says kills the germs that cause bad breath. Twelve pellets of the gum will be priced at $1.09.

(Reuters photo of M&M’s, the old school version)

Check Out Line: A Monday morning sugar rush

Check Out investors waking up to a sweet deal on Monday morning.

M&M’s maker Mars Inc and Berkshire Hathaway Inc are buying Wm Wrigley Jr Co, the largest U.S. chewing gum maker, for $23 billion.marscut.jpg
The deal will create a confectionary giant, bringing together Wrigley’s Altoids, Extra and Eclipse brands, with Mars’ M&M’s, Snickers, Starburst and Twix.

The newly announced deal could trigger a renewed push toward consolidation in the global candy business.
One potential deal that has been discussed previously, and could invite fresh interest, is that between London-based Cadbury Schweppes, known for its Dairy Milk chocolate, and Trident gum brands, and top U.S. chocolate maker Hershey Co.

The two companies are reported to have talked in the past, though the Hershey Trust, which controls about 78 percent of Hershey’s voting shares, has said Pennsylvania law requires it to maintain control of Hershey.