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'Marketplace' Report: Mars-Wrigley Merge

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'Marketplace' Report: Mars-Wrigley Merge

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'Marketplace' Report: Mars-Wrigley Merge

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ALEX CHADWICK, host:

From NPR News, it's Day to Day. If you own shares in the chewing gum giant Wrigley's, this is a whoopee day for you because shares soared after the world's biggest candy seller, Mars, said that it is buying Wrigley's. The purchase promises to have lots of effects. Marketplace's Sam Eaton joins us now. Sam, give us the significance on this buyout, would you please?

SAM EATON: Well, Alex, it really changes the game in the candy industry. I mean, here you have a global chocolate powerhouse, Mars, paying about 23 billion dollars for the world's number-one chewing gum maker, Wrigley's. That's an enormous premium over Friday's closing price for Wrigley's stock, which is why we are seeing such a surge in buying today. I spoke with industry consultant Elizabeth Echandia (ph), and she says together these two merged companies create a global behemoth with a powerful suite of products.

Ms. ELIZABETH ECHANDIA (Industry Consultant): They have everything from, you know, kids' iconic brands to, you know, really old sort of brands like, whether it be the Wrigley's Juicy Fruits and the Snickers and those kinds of things. They really do run the gamut. Every segment of the population can be served with a confectionary by this company.

EATON: And now that, of course, gives the combined company a lot more influence with retailers, since it basically becomes a one stop shop for every candy category. It is also the joining of two iconic American companies. Mars is still family owned. Wrigley's is publically traded but family controlled. That means the similar cultures of the two corporations will also meld well, even though they will remain separate entities.

CHADWICK: I'm still trying to get over your "suite of products" comment, but - so, you know, 23 billion dollars for a chewing gum. I had no idea that these things were going to cost this much money. I guess the market didn't, either. But the question is, what is this going to mean for the competition?

EATON: Well, I'm sure they are not too thrilled, Alex. Together, Mars and Wrigley's create a force to be reckoned with. The only other player that comes close to their product line up is Cadbury, but the British chocolate and gum maker only has about half of Mars' market share in global chocolate sales. Now, some analysts I talked to say that could force a merger between Cadbury and Hershey's, which we heard about earlier this year, where, so far, both parties aren't willing to agree on any deal. The main battlefield, though, will be in global markets, not hear in the U.S. Both Wrigley's and Mars get most of their revenue from outside the U.S. Combine the weak dollar with a one-stop-shop for the retailers' entire candy needs, and Cadbury's has got to be feeling the heat from this merger.

CHADWICK: With the problems, bleak news in the retail sector, why is Mars paying so much, with the economy on shaky grounds these days?

EATON: Well, you know, the analysts I spoke to say Mars may indeed be paying too much. Wrigley's has struggled in the U.S. in the face of some pretty intense competition. But that wasn't enough to scare off the deal's chief architect, billionaire investor Warren Buffett, who is perhaps more attracted to Wrigley's iconic brand-name than its financial statements. Combined, it will create what analysts refer to as a one plus one equals three kind of deal. Basically, the sum is greater than the parts.

CHADWICK: Thanks, Sam. Sam Eaton of Public Radio's daily business show, Marketplace.

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