Warren Buffett Similing This Morning

Warren Buffett was smiling this morning on CNBC while announcing his role (and that of Berkshire Hathaway) in helping Mars Inc. buy Wrigley. Berkshire will be contributing about $6.5 billion to help with the acquisition. What does Buffett get in return? The $6.5 billion consist of $4.4 billion of subordinated debt to help Mars pay for the acquisition, along with a $2.1 billion equity stake in Mars after the deal closes, with the shares being bought at a discount. Just another version of the "golden rule" - those with the gold make the rules. On the other hand, a nice premium is being paid for Wrigley, something that Buffett usually tries to avoid, although he has paid-up a few times to get a strong name. At least here he is getting a discount on the premium (if that makes sense).

Of course, everything may not be as sugar coated as the company's products. A combined Mars - Wrigley will control a large segment of the confectionery market, creating a "global powerhouse" to use the WSJs words. It will be interesting to see if this becomes an anti-trust concern. After all, regulators do not have anything else to work on right now, so making sure the chocolate and sugar markets are not being cornered should be a priority.

Finally, the real story may have been the fact that Goldman Sachs was willing to step up to the plate and fund the merger to the tune of $5.7 billion. Not a big risk or huge numbers for Goldman (interesting how $5.7 billion is not considered huge anymore), but certainly big enough to show up on the financial statements. Personally, I kind of miss Merger Mondays. It always starts the week off with a little momentum. Not sure this is the blockbuster that will break the trend, given that Berkshire was needed to co-sign the loan, but it is a start.

Tickers: WWY, BRK.A (for those driving Mercedes), BRK.B (for the rest of us)