Warren Buffett stepped in on a critical financing of a merger of Mars and Wrigley corporations.  The two produce very distinct lines of candy, Mars producing nearly every candy bar under the sun and Wrigley with the lions share of gum.  This opportunity is great for both candy producers and Buffett as well.  Any investment good enough for Buffett is good enough for the rest of the market.

Buffett’s interest would only go as far as a $2.1 Billion minority stake in Wrigley after the companies are merged.  Warren Buffett is known for buying only the most simple of companies, those that are easily understood and have a great long term perspective.  He holds huge stakes in companies like Coca-Cola, American Express, Budweiser and many other corporations that market products directly to consumers.  This is the perfect business to fit in with the many different positions he currently owns.  Eventually it seems as though Berkshire will have a horizontal monopoly on the consumer goods market.

Privately held Mars posted a serious offer for Wrigley that amounted to $80 per share, a huge premium even over today’s closing price of $76.91.  The deal will be done entirely with cash as Mars is still family owned and operated, Buffett’s investment is merely for a small stake as an investment rather than a controlling partner.

While Mars is fronting some serious cash for Wrigley with a bid that is equal to a price earnings multiple of 35, the company hopes a merger will allow the two to operate a more simpler marketing budget while competing with other confectioners.  Wrigley also gives Mars a leg up on the gum industry, one product that is absent from the Mars line.

One interesting note from the transaction is the Wrigley will take on Mars’ nonchocolate confections such as Skittles and Starburst.  The specialization of the two companies promises a better product and a better ability to grow.  Wrigley’s huge exposure to developing markets is another key marker for Mar’s which has huge success in the US but limited growth overseas.

In almost all cases this is a great deal.  Buffett wins out by taking a good position in a reputable company, shareholders get a huge premium and the deal should go through without delay to be completed entirely in less than 12 months.