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Mars Cashes Out Warren Buffett to Take Control of Wrigley – New York Times

Mars Inc. has finally taken full control of Wrigley, formally putting M&Ms and Altoids mints in the same division — and cashing out its partner, Warren E. Buffett, in the process.

In a statement on Thursday, Mars said it would combine Wrigley with its chocolate business, creating the Mars Wrigley Confectionery.

In cashing out its partner ahead of schedule — the privately held Mars could begin buying some of Mr. Buffett’s stake this month — the confectioner is exercising full control over one of the biggest acquisitions in the company’s 126-year history.

And it is retiring what had been pricey financing to strike the takeover, which most likely generated a tidy profit for Mr. Buffett’s conglomerate, Berkshire Hathaway.

“I have enjoyed all of Berkshire’s experiences with the Mars family and management and wish them the very best,” Mr. Buffett said in an emailed statement. “Both Mars and Berkshire have profited from our investment and that’s the way it should be.”

Berkshire Hathaway helped Mars buy Wrigley for about $ 23 billion in 2008. It was a classic deal for the billionaire, who has traditionally favored acquisitions involving well-known names and strongly performing businesses.

But there was a lucrative element in the way Mr. Buffett participated in the transaction. As part of the arrangement, Berkshire received preferred shares worth about $ 2.1 billion, which paid a 5 percent annual dividend, and $ 4.4 billion worth of bonds that carried a hefty 11.45 percent interest rate.

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Mars will combine Wrigley with its chocolate business, bringing together M&Ms and Snickers with Doublemint gum. Credit Larry Downing/Reuters

Mr. Buffett has done such financing on occasion — always on terms generous to the billionaire. Berkshire bought billions of dollars worth of preferred shares in General Electric and Goldman Sachs during the financial crisis of 2008. Indeed, that troubled year represented an extraordinary opportunity for Mr. Buffett. In his letter to shareholders in 2009, he noted that Berkshire “poured $ 15.5 billion into a business world that could otherwise look only to the federal government for help.”

Mr. Buffett also bought preferred shares of Bank of America in 2011 and helped 3G Capital, a deal-hungry investment firm that he publicly praised, in its acquisitions of Heinz and Kraft.

The dividends that those preferred shares paid Berkshire were hefty, rising to as high as 10 percent.

Mars paid off its Berkshire bonds three years ago. Berkshire said in a regulatory filing this summer that it expected the preferred shares to be cashed out as soon as this year.

The partnership has already been profitable for the Buffett-run conglomerate. When Mars bought back Berkshire’s bonds in 2013, Mr. Buffett’s company collected at least $ 680 million from that transaction, The Wall Street Journal reported at the time. Berkshire has earned roughly $ 840 million in dividends from the preferred shares as well.

Financial terms of Thursday’s deal were not disclosed, though previous preferred-stock investments by Berkshire charged a premium if they were cashed out ahead of schedule.

“We are grateful for the strong and productive partnership we have with Warren Buffett and Berkshire Hathaway. It is a great relationship that has yielded value on both sides,” Grant F. Reid, Mars’s chief executive, said in a statement. “We’re equally pleased that sole ownership of Wrigley provides us with an opportunity to rethink how we simplify our chocolate and Wrigley businesses so that we can bring a more holistic approach to this vibrant category.”

Mars said it expects to fully combine the two businesses over 2017.

Martin Radvan, global president of Wrigley and a 30-year veteran of Mars, will lead the new Mars Wrigley Confectionery. The headquarters of the combined business will be in Chicago.

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