Buffett: Why Wrigley? ‘I Know What I’m Getting’

If you get a chance to buy a wonderful business, grab it, advises Warren Buffett.

That's what he told CNBC recently in the wake of his joint purchase, with Mars, of the Wm. Wrigley Jr. Co., for a reported $23 billion.

Buffett’s holding company, Berkshire Hathaway, is putting in $6.5 billion of the total and will not manage the venture. Mars is privately held.

"I've been conducting a 70-year taste test since I was seven years old on Mars products," Buffett said by way of explaining his latest deal. "And they've met the 70-year taste test." Mars and the Wm. Wrigley Jr. companies make candies and gum products, among other edibles.

"The Mars people asked me about participating in this [the purchase of Wrigley]," said Buffett "And we're financing, but we are a very junior partner." Although financing is not a common role for Berkshire Hathaway, Buffett said, "it's something we have done before and will probably do again."

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But beyond Buffett's taste test, is this multi-billion dollar purchase a good deal in hard economic times?

"Both companies have great brands," said Buffett. "When I talk to classes of university students for a dozen years or more, I've used Wrigley as an example... I've known about their figures. Of course, I haven't known about Mars because they're a private company.

"There's really nothing that can go wrong with something like the Wrigley or Mars brands. It's literally true that they've faced the test of time over decades and decades, and people are using more of their products every day."

Buffett said he will not attempt to exert operating influence in the management of the new acquisition.

"That's not in the cards at all," he maintains. "No, we're on different ends of the game. There'll be no connection at all."

Asked why his $6.5 billion went into the candy and gum industry and not into a financial institution Wall Street, Buffett replied with his characteristic bluntness.

"I understand a Wrigley or a Mars a whole lot better than I understand the balance sheets of some of the big banks. I know what I'm getting with this."

As for some of the larger financial institutions, said Buffett, "I really don't know what's there."

Buffett added, though, that we might well be over the credit-crunch, although he restrained his enthusiasm.

"I think what the Fed did...with Bear Stearns [was proper, and] was a big line in the sand. That changed the game. At that point, the financial world started looking different."

On the economy in general, however, Buffett said, "I think we're in a recession. A recession is defined in a certain way by the National Bureau of Economic Research. But I think it's defined by the man in the street a little differently than whether there's been two quarters of GDP growth.

"We're in a recession unless you want to stick strictly to the technical definition, which I think doesn't have much meaning to the fellow who's lost his job, or is facing a money market fund that isn't paying him out."

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