The candy maker Mars Inc on Thursday said it would take full control of its Wrigley chewing gum business, acquiring the minority stake held by Warren Buffett's Berkshire Hathaway Inc (BRKa.N). Mars plans to combine Wrigley with its chocolate business, putting M&Ms, Snickers, Starburst fruit chews, Doublemint and Extra gum, and Altoids mints under one roof.
In 2008, Berkshire invested in Wrigley when it acquired $2.1 billion of preferred stock and $4.4 billion of bonds in connection with privately held Mars' $23 billion purchase of the chewing gum maker.
The bonds were repurchased in 2013, and Berkshire expected Mars to redeem half of the preferred stock, which carries a 5 percent dividend, by early January. Mars will instead redeem all of it. Terms were not disclosed.
"I have enjoyed all of Berkshire's experiences with the Mars family and management and wish them the very best," Buffett said in a statement. "Both Mars and Berkshire have profited from our investment and that's the way it should be."
The global confectionery business, worth $183 billion last year according to Euromonitor International, has struggled as more consumers move toward healthier foods, prompting some retailers to reduce shelf space for processed and sugary snacks.
"We are grateful for the strong and productive partnership we have with Warren Buffett and Berkshire Hathaway," Mars Chief Executive Grant Reid said in a statement. "Sole ownership of Wrigley provides us with an opportunity to rethink how we simplify our chocolate and Wrigley businesses."
Mars, the world's largest candy maker ahead of rivals such as Mondelez International Inc (MDLZ.O) and Hershey Co (HSY.N), expects to combine its chocolate and Wrigley businesses during 2017 into Mars Wrigley Confectionery, with about 30,000 employees.
The combined business will be based in Chicago, Wrigley's longtime home, and led by Martin Radvan, Wrigley's president and a 30-year veteran of Mars. Mars is based in McLean, Virginia. Known for his taste in less-than-healthy food, Buffett has made Berkshire the largest shareholder of Coca-Cola Co (KO.N), and helped Brazil's 3G Capital take over Kraft Heinz Co (KHC.O) and Restaurant Brands International Inc (QSR.TO), which owns Burger King and Tim Hortons. Berkshire also owns See's Candies.
But unwinding the Mars stake will deprive Berkshire of a $105 million annual income stream from the preferred stock.
The investment was one of several that Buffett's Omaha, Nebraska-based conglomerate made during and soon after the financial crisis in brand name companies seeking to shore up their finances, and win the billionaire's imprimatur.
From 2008 to 2011, Berkshire invested well over $20 billion in high-yielding securities from Bank of America Corp (BAC.N), Dow Chemical Co (DOW.N), General Electric Co (GE.N), Goldman Sachs Group Inc (GS.N), Swiss Re AG (SRENH.S) and Wrigley.
But many have been repurchased, forcing Buffett to find other ways to invest Berkshire's $72.7 billion of cash.
He lost $720 million of annual income in June when Kraft Heinz, in which Berkshire still owns a 26.8 percent stake, redeemed preferred stock. The Wrigley notes had thrown off an 11.45 percent coupon.
(Reporting by Jonathan Stempel and Chris Prentice in New York and Gayathree Ganesan in Bengaluru; Editing by Ted Kerr, Bernard Orr)