EU gives green light to Wrigley-Mars merger

By Lindsey Partos

- Last updated on GMT

Related tags: Gum, European union, Mars incorporated, Wrigley, Cadbury, Mars

US confectionery giant Mars receives the all clear from the European Commission to buy number one gum maker Wrigley in a deal worth €15 billion.

"There is no overlap in the parties core confectionery activities - chocolate and gum,"​ the Commission said in a statement on Monday.

Paving the way to create a global confectionery heavyweight with expected annual sales of about 17bn euros, the EU’s executive arm added that “although both parties are active in sugar confectionery, the limited market shares do not give rise to competition concerns”.

Announced in April this year, under terms of the deal Mars will acquire a controlling interest of 80.7 per cent in Wrigley.

Financing for the transaction - that sees Wrigley exist as a stand-alone subsidiary - will be provided by billionaire Warren Buffet’s Berkshire Hathaway firm, investment bank Goldman Sachs Group and JP Morgan Chase.

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

As part of the transaction Mars' non-chocolate sugar brands, including Starburst and Skittles, will be added to Wrigley's confectionery portfolio.

Underlining their approval, the European Commission concluded on Monday that "there is no risk that the joint entity could use the strong market position Wrigley currently enjoys on the gum markets to gain an unfair advantage over their competitors through foreclosure of chocolate markets."

Approval from the European Commission will set the analysts chatting again. Confronted by a more challenging marketplace and increased competition, the Mars-Wrigley link-up has prompted industry onlookers, notably institutional investors, to speculate on a possible future merger of US chocolate firm Hershey with recently slimmed-down UK firm Cadbury, that earlier this year shed its US drinks business.

Indeed, in May this year shares in Hershey rose nine per cent following speculation by some US-based analysts that the company's only real chance of survival was to hook up with another firm.

While Cadbury remains upbeat about its position on the worldwide gum market. Last month the UK firm upped the stakes in the gum war with the launch of Trident Sweet Kicks, a mint-flavoured gum with a chocolate-flavoured liquid centre.

Targeting women seeking a 'moment of pleasure in a sugar-free, low-calorie gum', Cadbury claims its new launch, with its focus on indulgence, breaks new ground for the gum category.

At the same time, this latest launch will seek new opportunities to grab market share away from rival US gum firm Wrigley.

"Cadbury is continuing to shake up the UK gum market with Sweet Kicks...[a great] example of our commitment to using cutting-edge innovation to take the gum-chewing experience to the next level,"​ said Trevor Bond, managing director of Cadbury Britain and Ireland

Despite a testing confectionery sector, that in the EU posted annual growth rates in 2007 of 2.5 per cent, and whose value, according figures from Key Note Publication, in the UK alone dropped from ₤4.41bn (€5.65bn) in 2006 to ₤4.31bn (€5.52bn), the launch of Cadbury's Trident brand into the chewing gum market in 2007 brought in considerable incremental sales of £40m for this sector for Cadbury.

Indeed, Cadbury claims that the Trident launch in the UK resulted in a 16 per cent growth in the UK gum market, with 'Trident responsible for 77 per cent of the gum category's growth' in 2007.

The firm asserts to be number one in 18 of the top 50 gum markets worldwide, with gum vital to the company's growth and now making up to 35 per cent of the company's revenues.

Related topics: Manufacturers, Gum, Mars

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