Finance History | Wrigley Building, Chicago, 6 October 2008 — US$6.5 Billion Financed Mars's Wrigley Deal

On 6 October 2008, Berkshire Hathaway invested US$6.5 billion in 2008 dollars in securities issued in connection with Mars's acquisition of the Wm. Wrigley Jr. Company.

The package contained US$4.4 billion principal amount of subordinated notes in 2008 dollars paying 11.45 percent and due in 2018. It also included US$2.1 billion of Wrigley preferred stock in 2008 dollars.

Mars obtained acquisition financing during the same month that credit markets were convulsed by bank failures and emergency interventions. Berkshire supplied capital with a long horizon, but it did so through contractual claims rather than by purchasing ordinary Wrigley shares in the market.

The subordinated notes sat below senior obligations, so their high yield compensated for both company credit risk and weaker priority in a restructuring. The preferred stock added an equity-linked claim and a minority interest subject to a shareholder agreement with Mars.

This arrangement fit a recurring Berkshire pattern during stressed markets. The company could commit several billion dollars quickly because it maintained large liquid resources before opportunities appeared, even though holding that cash reduced returns in calmer periods.

Wrigley's business supplied a separate source of protection. Gum and confectionery brands depended on habitual small purchases, broad distribution and shelf presence, giving the operating company recurring demand that was less capital-intensive than many industrial borrowers.

The financing still involved merger risk and concentration. Mars had to integrate a large global business, while Berkshire's notes and preferred shares could not be treated as cash despite their attractive contractual returns.

The notes were repurchased in 2013 at 115.45 percent of par under amended terms. Mars purchased Berkshire's remaining Wrigley preferred stock in 2016 for approximately US$4.56 billion in 2016 dollars, including a prorated dividend.

The Wrigley Building at 410 North Michigan Avenue was the company's headquarters when the transaction closed. Its paired towers anchor a deal in which a branded consumer franchise supported layered debt and preferred capital during one of the hardest financing markets in modern history.

Photo: Daniel Schwen, CC BY-SA 4.0, via Wikimedia Commons.