Wrigley: Grand Plans That Didn't Stick

Bill Wrigley tried to do big things but never had a breakthrough. Now the company is going to rival Mars, with Warren Buffett serving as banker

Bill Wrigley, executive chairman and chairman of the board of the Wrigley Company (left), and Bill Perez, president and CEO of Wrigley Olson/Getty Images

by Pallavi Gogoi

In 1999, when William Wrigley Jr. took over the reins of the century-old company that bears his name, he aspired to take Wrigley (WWY) beyond chewing gum to greater heights. He made a bold bid in 2002 to acquire Hershey Foods (HSY) for $12 billion, and hired scores of food scientists, chemists, and engineers for an innovation center he opened in 2005 on a 7.6-acre Chicago site that he hoped would yield the next greatest thing since chewing gum.

The same year, he bought Life Savers and Altoids, the "curiously strong" mints, from Kraft Foods (KFT) for $1.5 billion. "Bill dreamed of building a confectionary powerhouse," says Jim Burns, president of Syracuse (N.Y.)-based investment firm J.W. Burns & Co., which owns 125,000 Wrigley shares.

For all his efforts, Wrigley, 45, hasn't been able to realize any of those ambitions. The Hershey board rejected his takeover offer. The innovation center hasn't really had a breakthrough product. And Wall Street analysts now say Wrigley overpaid for Altoids. The onetime powerhouse mints line saw its sales drop by 7% last year, following a 17% decline the year before. In 2006, Wrigley gave up his CEO job to former Nike (NKE) chief William Perez. He remained chairman and continued to run annual shareholders' meetings. But last year, British rival Cadbury Schweppes (CSG) grabbed market share from Wrigley with its Trident and Dentyne gum brands, and Wall Street was expecting Wrigley's sales to slow in 2008.

"Wrigley has been feeling the heat" from Cadbury, says David Morris, research director for food and beverage at research firm Mintel in Chicago.

"The Best Possible Outcome"

Thus William Wrigley was in no position to spurn the rich offer he got on Apr. 11, while sitting at the McLean (Va.) kitchen table of Paul Michaels, the CEO of privately held Mars. On Apr. 28, after two weeks of intense negotiations, Wrigley agreed to be bought for $23 billion in cash. The deal gives Mars—maker of such iconic candy brands as M&M's and Snickers bars—combined annual sales of $27.4 billion. It should enable Wrigley to fend off hard-charging Cadbury, which earlier in April spun off its U.S. drinks division (BusinessWeek.com, 4/11/08). And at $80 a share, the Wrigley purchase price represents a 28% premium over Wrigley's stock price.

"It was a compelling offer and after numerous board meetings, we decided that this was the best possible outcome," Wrigley said in an interview with BusinessWeek.

Some shareholders are also hopeful the much larger Mars will be able to leverage Wrigley's brands in ways the smaller company was never able to pull off. "The two together will be more powerful at placing their brands at the checkout counter," says Morris. "Besides, Mars has proved to be extremely innovating and cutting-edge with introducing new flavors, which Wrigley could benefit from."