Privately held candy giant Mars Inc. announced Thursday that it had bought out a minority stake in its Wrigley subsidiary held by Warren Buffett's Berkshire Hathaway (BRK.B - Get Report) for undisclosed terms.
Mars, one of the 10 largest private companies in the U.S., said in a statement that it would combine Wrigley with its chocolate segment to create a new Mars Wrigley Confectionery segment. Wrigley President Martin Radvan will lead the new segment and its 30,000 employees. The division will be based in Chicago and is expected to be "phased in" next year.
Mars Wrigley Confectionery's holdings include Snickers bars, M&Ms, Dove chocolate, Twix bars and Maltesers in chocolate; Doublemint, Extra, Orbit, Altoids and Lifesavers in gum and mints; and Skittles and Starbursts in "fruity confections."
A Mars spokesman said by email that Berkshire owned a 19.3% equity interest in Wrigley and that the buyout was completed Sept. 27. He declined to comment on the financial terms of the deal.Mars and Berkshire unveiled plans to buy gum company Wm. Wrigley Jr. Co. for about $23 billion in April 2008. That deal included $4.4 billion in subordinated debt from Berkshire, and Berkshire purchased a discounted minority equity interest for $2.1 billion following the close of the acquisition in October 2008. Although publicly traded, Wrigley had been controlled by its founding family since 1891, while the Mars family has owned their company since its 1911 founding.
Under the terms of the deal, half of Berkshire's Wrigley preferred stock, which was entitled to dividends of 5% per annum, could have been redeemed in the 90-day period beginning Thursday, with the remainder available for termination in 2021.
"We currently anticipate that such shares [the 50% stake] will be redeemed," the Omaha-based company said in its Aug. 5 Form 10-Q filing with the Securities and Exchange Commission. Berkshire, however, negotiated a sale of its entire stake.
"The accelerated buy-out has been in the works for some months," the Mars spokesman said.
In 2013, Mars bought back the $4.4 billion in debt, which was due 2018 and paid 11.45% interest. Berkshire has made such high-interest loans to companies including Goldman Sachs Group (GS - Get Report) , General Electric (GE - Get Report) and Bank of America (BAC - Get Report) .
"Both in working with the Mars family and the Mars-Wrigley management, it couldn't have been a better experience from both a personal and financial standpoint," Buffett told the Financial Times, which first reported the news.
Mars CEO Grant Reid said in a statement that the McLean, Va.-based company was "grateful for the strong and productive partnership we have with Warren Buffett and Berkshire Hathaway" but also "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."
David Garfield, head of the consumer products practice at AlixPartners, said the deal "should help [Mars] continue to enhance their efficiency and speed."
"We may not see 'chocolate gum' on Day 1, but co-location (having everyone in one location) should support collaboration and innovation," he said by email. "This will allow the combined company to use all its brands and assets, in concert, to tackle challenges and opportunities in confectionery."
Reid, formerly head of Mars' chocolate division, became CEO in 2014, replacing Paul Michaels, the company's first nonfamily CEO, who took the helm in 2004. Forrest Mars Jr., a Mars family patriarch who ran the company with his two siblings for decades, died July 26.
The deal is Berkshire's first that isn't an add-on since Jan. 29, when the conglomerate closed on its acquisition of Precision Castparts for $37.2 billion, followed by the Feb. 29 close of its $3 billion acquisition of the Duracell battery business from Procter & Gamble (PG - Get Report) .
A notorious sweet tooth with a well-documented Cherry Coke addiction, Buffett, through Berkshire, also owns See's Candies and Dairy Queen as well as major stakes in Coca-Cola (KO - Get Report) , Kraft Heinz (KHC - Get Report) , Mondelez International (MDLZ - Get Report) and Restaurant Brands International (QSR - Get Report) .
For its part, Mars hasn't made a major acquisition since July 2014, when it paid $2.9 billion for most of P&G's pet food business.
Berkshire has incurred large losses recently from its stake in Wells Fargo (WFC - Get Report) , whose stock has taken a beating because of a scandal linked to phony accounts. Berkshire applied to the Federal Reserve over the summer, before the scandal broke, to increase its stake beyond 10%. Buffett told Fox Business Network last month that he would discuss neither Wells Fargo nor the presidential election until November.
As of June 30, Berkshire had $72.7 billion in cash and cash equivalents.
Berkshire's Class B shares closed down 0.19% at $143.87 in Thursday trading.
Berkshire Hathaway representatives did not respond to requests for comment.