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The Wm. Wrigley Jr. Co. has signed a purchase agreement to acquire an 80-percent initial interest in A. Korkunov, a privately held premium chocolate company in Russia, with the remaining 20 percent to be acquired over time.
The $300 million being paid by Wrigley for the 80-percent stake will be offset in part by approximately $55 million in cash tax benefits. The net cost of the transaction represents approximately three times the company's 2006 sales, which are estimated at $100 million for the total company. The acquisition is subject to customary closing conditions, including certain regulatory clearances.
"We have always said we would enter the chocolate segment of the total confectionery business if the right opportunity to create value for the Wrigley Co. became available -- and this acquisition presents such an opportunity," said Bill Wrigley, Jr., executive chairman of the company and chairman of the board.
"A. Korkunov has strong brands and is a key player in the premium chocolate segment in Russia -- an already strong and dynamic geography for the Wrigley Co., where we are the number-one player in the chewing gum category," he added, citing AC Nielsen retail tracking data. "Entering into the premium chocolate category is not only a great strategic fit and an expected driver of new growth opportunities in one of our top priority global geographies, it also represents an important addition to our competencies and has the long-term potential to create value in marketplaces around the world."
Founded in 1999 by two Russian entrepreneurs, Andrey Korkunov and Sergey Lyapuntsov, A. Korkunov has become the seventh-largest player in the overall Russian chocolate category, which has an estimated value of $3.7 billion. It is also the number-two player in the overall premium-boxed chocolate segment, with its namesake brand -- A. Korkunov -- the top-seller in that highly competitive segment.
Additionally, A. Korkunov has been named a "top ten" brand in Russia by both Young & Rubicam and the Rus Brand Independent Organization. It is also the only native Russian brand with an awareness level on par with those of leading global consumer goods brands -- such as Sony, Gillette and BMW -- according to the Young & Rubicam "Power Brand" ranking.