Candy and gum maker Wm. Wrigley Jr. Co. announced Monday it has agreed to buy a number of candy brands, including Life Savers and Altoids, from Kraft Foods for $1.48 billion.
The agreement also covers the Creme Savers brand, as well as Trolli gummy candies, Sugus candies and other local and regional brands in the United States, Europe, Indonesia and Thailand.
Hershey Foods Corp., Mars Inc., Nestle SA and Cadbury Schweppes PLC were among the companies vying for the Kraft confections package.
“There are only a handful of confectionery brands around the world that have the combination of heritage and vitality that can match up with Wrigley brands,” said Bill Wrigley Jr., the company’s chairman, president and CEO. “Altoids and Life Savers are two such brands.”
Officials with Chicago-based Wrigley said the all-cash purchase price would be partially offset by about $300 million in cash tax benefits associated with amortization of intangible assets. The net acquisition cost of $1.18 billion represents 2.4 times estimated 2004 sales.
The sale unloads brands that generated roughly $500 million in sales for Kraft and just less than $100 million in earnings before interest, taxes, depreciation and amortization.
Northfield-based Kraft, with $31 billion in sales, decided recently to cede most of its confection brands in order to concentrate its sales force on what food executives call the “center” of the store; that is, the traditional supermarket aisles stocked with blocks of Kraft cheese, boxes of Nabisco cookies and cans of Maxwell House coffee.
“By enabling us to better focus our resources, the sale should create value for Kraft, as well as our employees, customers and shareholders,” said Kraft chief executive Roger K. Deromedi.
Analysts said Wrigley had about 7.8 percent of the U.S. confectionery market before the sale was announced. Kraft had about 4.7 percent.
The transaction fits with Kraft’s oft-stated intention to get out businesses that aren’t part of its core strategy.
“Kraft is really about cheese, cookies, drinks and meats, and Life Savers and Altoids didn’t really fit in well with that,” said analyst Mark Hugh Sam of Chicago-based Morningstar Inc.
The deal also is a big boost to Wrigley, he said, because “It continues to give credence to Bill Wrigley’s vision of transforming Wrigley from a chewing-gum company into a global confectionery business.”