The unlisted Mars group has agreed all-cash acquisition of Wrigley for
around $23bn (£11.5bn) to overtake Cadbury
Schweppes as the world’s biggest confectionery company.
Mars is offering $80 a share for Wrigley, a 28% to its closing price on
Friday. Berkshire
Hathaway, Warren Buffett's investment vehicle, is helping to finance
the deal..
Wrigley is the leading global player in the chewing gum market with
34.5% market share, but has almost no chocolate products where Mars is
the leading manufacturer with a 17.7% global share.
Analysts said that a $23bn price tag would value Wrigley at a
prospective enterprise value of nearly 17 times this year's EBITDA, and
about 3.9 times turnover. This would be higher than recent transaction
multiples, which have averaged an EV/EBITDA of 15.5 times, they said.
"This transaction is likely to re-kindle speculation about Cadbury
Schweppes and particularly the future of Cadbury in terms of an
independent entity after the IPO of the beverages activity on 7 May,"
said analysts at Natexis Securities.
Cadbury, which last year abandoned merger talks with Hershey,
is due to spin out Dr Pepper Snapple Group next month. The group said
today that shareholders with 100 old Cadbury stock will receive 64 new
Cadbury shares and 12 DPSG shares when the group demerges.
"On the basis of a speculative valuation, we value Cadbury Schweppes on
a sum-of-the-parts model at 670p per share pointing to a prospective
2008 EV/EBITDA multiple of 14 times for the confectionery activity,"
Natexis said.
"While this multiple may appear on the conservative side compared to the
estimated multiple for the Wrigley transaction, nevertheless, Cadbury
generates profitability two times lower than Wrigley in the
confectionery activity (Cadbury’s 2007 operating margin was 9.8%, vs.
17.9% for Wrigley). In addition, Cadbury operates in three activities
including chocolate, sweets and chewing gum with chocolate and sweets
generating less attractive growth rates than chewing gum (Wrigley’s main
activity)."
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Cadbury climbs as Mars grabs Wrigley
Hemscott, 28/04/08 12:31
Shares climb amid sector consolidation hopes as Mars agrees an £11.5bn takeover bid for Wrigley, the world's leading chewing-gum maker.
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The unlisted Mars group has agreed all-cash acquisition of Wrigley for around $23bn (£11.5bn) to overtake Cadbury Schweppes as the world’s biggest confectionery company.
Mars is offering $80 a share for Wrigley, a 28% to its closing price on Friday. Berkshire Hathaway, Warren Buffett's investment vehicle, is helping to finance the deal..
Wrigley is the leading global player in the chewing gum market with 34.5% market share, but has almost no chocolate products where Mars is the leading manufacturer with a 17.7% global share.
Analysts said that a $23bn price tag would value Wrigley at a prospective enterprise value of nearly 17 times this year's EBITDA, and about 3.9 times turnover. This would be higher than recent transaction multiples, which have averaged an EV/EBITDA of 15.5 times, they said.
"This transaction is likely to re-kindle speculation about Cadbury Schweppes and particularly the future of Cadbury in terms of an independent entity after the IPO of the beverages activity on 7 May," said analysts at Natexis Securities.
Cadbury, which last year abandoned merger talks with Hershey, is due to spin out Dr Pepper Snapple Group next month. The group said today that shareholders with 100 old Cadbury stock will receive 64 new Cadbury shares and 12 DPSG shares when the group demerges.
Shares in the confectioner rose 2.66%, up 15p to 578.5p to value the group at £12.2bn.
"On the basis of a speculative valuation, we value Cadbury Schweppes on a sum-of-the-parts model at 670p per share pointing to a prospective 2008 EV/EBITDA multiple of 14 times for the confectionery activity," Natexis said.
"While this multiple may appear on the conservative side compared to the estimated multiple for the Wrigley transaction, nevertheless, Cadbury generates profitability two times lower than Wrigley in the confectionery activity (Cadbury’s 2007 operating margin was 9.8%, vs. 17.9% for Wrigley). In addition, Cadbury operates in three activities including chocolate, sweets and chewing gum with chocolate and sweets generating less attractive growth rates than chewing gum (Wrigley’s main activity)."
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