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US$23b deal creates sweets giant

M&M's candy maker Mars has teamed up with billionaire Warren Buffett to buy Wm Wrigley Jr, the world's largest chewing gum maker, for US$23 billion (HK$179.40 billion) - creating the world's largest confectionary company.
The deal, announced yesterday, will give Buffett's Berkshire Hathaway a minority stake in Wrigley, which will become a separate Mars subsidiary. Buffett's other food holdings include a stake in Kraft Foods.

Aside from Berkshire, financing for the deal is also being provided by Goldman Sachs, JPMorgan and Mars.

At US$80 a share, the deal represents a 28 percent premium over Wrigley's closing stock price of US$62.45 on Friday.

"The combined entity would have significant scale and breadth in a very attractive segment of the global food industry," Andrew Wood, analyst at Sanford Bernstein, said in a research note ahead of the formal announcement of the deal. The combined companies would have a major presence in chocolate, gum and sugary sweets.

The Mars-Wrigley deal could force Mars rival Hershey and Cadbury into a deal of their own. Wrigley has brands such as Altoids, Extra and Eclipse, while privately held Mars is known for M&M's, Snickers, Starburst and Twix.

In economic news, the European Commission said growth in the 15 nations that use the euro would slow to 1.7 percent this year and 1.5 percent in 2009 from 2.6 percent in 2007.

In its twice-yearly economic forecasts, the Commission warned euro zone inflation would jump more than previously forecast to 3.2 percent this year, fueled by food and oil prices, and ease to 2.2 percent in 2009. The ECB aims to keep inflation below 2 percent.

"With the present levels of oil prices above US$100 and with the high increase in food and other commodity prices, we are suffering a very strong inflationary shock," said Economic and Monetary Affairs Commissioner Joaquin Almunia.

US crude futures hit a new record at US$119.93 per barrel in London yesterday afternoon, boosted by big disruptions to Nigeria's output and a UK refinery strike, highlighting anxieties over threats to supply.

Source: The Standard

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