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NEW YORK -- Wm. Wrigley Jr. Co. is acquiring the Life Savers and Altoids businesses of Kraft Foods Inc. for close to $1.5 billion, according to the Wall Street Journal.
The deal, announced this morning, comes after an intense auction that pitted longstanding rivals Hershey Foods Corp., Mars Inc., Nestle SA and Cadbury Schweppes PLC against Chicago-based Wrigley, which delivered a price far higher than anticipated by industry analysts.
Kraft, the nation's largest food maker, felt that it needed to home in on markets in which it was dominant. Therefore, it is ceding most of the candy section to the candy companies, which can better manage their relations with retailers.
Altoids sales have grown 14 percent in the past four years, according to ACNielsen figures provided by Credit Suisse Group's Credit Suisse First Boston unit. But some analysts suspect the Altoids franchise peaked in 2001, and is relying on brand extensions to continue to grow. Life Savers, which have been around since 1912, saw sales decline about 16 percent in retail dollars over the past four years, according to ACNielsen estimates provided by CSFB.
But the brands' biggest weakness could have been their owner. Kraft, which is 84.6 percent owned by Altria Group Inc., has focused its sales force and marketing dollars elsewhere, leaving opportunities for focused players like Wrigley to steal shelf space and market share from Altoids and Life Savers.
The sale, which also includes two far smaller brands, Trolli gummy candies and Sugus candies, unloads brands that generated for Kraft roughly $500 million in sales and just under $100 million in earnings before interest, taxes, depreciation and amortization. The deal also includes some tax benefits for Wrigley.