The world’s second-largest foodmaker went public with its bid for Cadbury earlier this week after being snubbed privately. Kraft’s offer – a 31% premium to the chocolate maker’s Friday closing price of $37.46 a share, but less than  – “fundamentally undervalues” Cadbury, it said. The offer is less than 15 times Cadbury’s 2008 earnings before interest, tax, depreciation and amortization (EBITDA).

“Any follow-up offer by Kraft would likely involve a higher price,” Moody’s Investor Service senior analyst Brian Weddington said in a note. “The increased leverage that would result under the proposed transaction would be considerable.”

Increased leverage could be a boon to Cadbury and its investors, as The Hershey Co. (NYSE: HSY) will likely throw its hat into the bidding ring, one person familiar with the matter told The Wall Street Journal.

“Hershey recognizes that Cadbury is the last major confectionery company potentially available and, as such, is likely to make some response,” the person told The Journal. Nestle Chief Executive Officer said his company is always “open to acquisition opportunities if they fit strategically.”

Some analysts have Hershey teaming up with rival Nestle SA to make a joint offer for Cadbury and splitting its business, Reuters reported.

If Kraft and Cadbury can reach an agreement, it would be “bad news” for Nestle, Icap PLC analyst Andy Smith told Bloomberg News. “[Nestle has] the firepower to counter if they want.”

Cadbury and Kraft’s combined sales in 2008 were $51 billion, roughly half of Nestle’s in the same period.

However, Hershey’s position is less flexible.

The Pennsylvania chocolate maker has $1.7 billion in net debt and a market capitalization of $8.9 billion. Cadbury is valued at $17.7 billion, so any takeover by Hershey would require serious financing, according to The Journal.

Hershey could pursue a joint effort with Nestle, but that would mean turning Cadbury’s lucrative gum business over to the Swiss candy company to take to avoid antitrust issues.

Cadbury has almost 29% of the global gum market. The other big player in the sector is privately held Mars Inc., which became the world’s largest confectioner last year when it teamed with Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) to buy chewing gum icon Wm. Wrigley Jr. Company for $23 billion. Berkshire owns about 9.4% of Kraft’s shares, according to Reuters.

In January 2007, Cadbury Chief Executive Officer Todd Stitzer agreed with Hershey’s then-Chief Executive Officer Richard Lenny to remove that obstacle and suggested they create a “global confectionary powerhouse.” But any potential merger was held back by Cadbury’s beverage business, which included Dr. Pepper and Snapple.

Cadbury spun off its beverage business in May 2008, which resulted in the birth of the Dr. Pepper Snapple Group Inc. (NYSE: DPS).

Chances for a reverse scenario of Cadbury acquiring Hershey are slim, as the Hershey Trust is set on protecting the Hershey name and keeping it an American company.

“Simply put: We will not sell the Hershey Co.,” Hershey Trust Chairman LeRoy Zimmerman said in an opinion piece published last year in the Patriot-News of Harrisburg, PA.

While a number of analysts expect Kraft to raise its bid for Cadbury, the foodmaker is in a tight position because it does not have that much room to maneuver without threatening its balance sheet or risking its investment grade credit rating. The company already has almost $19 billion of bonds outstanding, according to Bloomberg.

Other companies mentioned as possible suitors are Kellogg Co. (NYSE: K) and PepsiCo Inc. (NYSE: PEP).

The worst economic downturn since the Great Depression and rising commodity costs have sent consumers looking for less expensive products at the grocery store, limiting companies’ ability to grow. As with Mars’ acquisition of Wrigley last year, companies are looking to consolidation for growth.

“Consolidation in the food sector has long been anticipated,” an unnamed merger advisor told Reuters. “Given the drop in [bottled] water revenues, Nestle and Danone are thought to look at acquisitions to spur revenue growth.”

For Kraft, a successful acquisition of Cadbury would spur its growth by expanding its presence in emerging markets like China, Brazil, Russia, and especially India. Cadbury is deeply entrenched in British Commonwealth nations such as India, where it has been selling chocolate for more than 60 years.

A takeover of Cadbury India “would open up a $500 million chocolate market which is growing at 15% per year,” Angel Broking Ltd. analyst Anand Shah told The Journal.

“I believe that in the current global economy, the growth prospects are constrained,” said Kraft Chief Executive Officer Irene Rosenfeld.

Shares of Kraft closed at $26.85 yesterday (Wednesday), up 1.51% or 40 cents, while Cadbury closed at $51.80, down .15%, or eight cents.

Source: Kraft’s Bid for Cadbury Not Sweet Enough

This from Mike:

If the global financial crisis has taught investors one thing, it’s that now is not the time to gamble with your money or your prosperity.

More companies have been bought, bailed out or bankrupted since this financial crisis began than most of us have seen in our lifetimes. And even as Wall Street’s dominoes keep falling, no one can be sure if the worst is over.

From here on – recession or not – targeting dividend stocks is one of the few strategies that will deliver income safely and efficiently.

In theory, dividends should prop up an investor’s portfolio during uncertain periods, or in market downturns. That’s because even if a company’s stock price falls, executives do all they can to maintain the firm’s dividend payout. That’s part of the reason that, over time, dividends have accounted for a major portion of investors’ total returns.

“Dividends are a nice anchor in a turbulent market,” said Judith Saryan, manager of Eaton Vance Dividend Builder Fund (EVTMX), FoxBusiness last year.

Or anytime. In fact, over the last 100 years, 40% of a stock’s total return is from dividends. That’s not surprising. According to a study by Ned Davis Research Inc.,  dividend-paying Standard & Poor’s 500 stocks rose by an average of 9.4% a year between 1972 and June of last year, well ahead of non-dividend-paying stocks, which rose by only 1.8% annually during the same period.

“Dividends are a sign of quality,” said Todd Ahlsten, manager of Parnassus Equity Income (PRBLX), said in an interview last year. “They force management to look at cash flow and how it invests in its business.”

But not all dividends are created equal. As losses mount, Standard & Poor’s 500 heavyweights have been putting their dividends on the chopping block, cutting or outright eliminating them for an indefinite time period.

And these aren’t fringe companies and chump change we’re talking about…

General Motors Corp. (GM), Ford Motor Corp. (F), Sprint Nextel Corp. (S), MBIA Inc. (MBI) – their dividends are gone.

And Citigroup Inc. (C), Bank of America Corp. (BAC), Fifth Third Bancorp (FITB) reduced their dividends to a mere penny. Fannie Mae (FNM) lowered its to 5 cents in August and hasn’t paid one since.

Nor does the list end there.

Just yesterday (Thursday), in fact, motorcycle icon Harley Davidson Inc. (HOG) slashed its dividend 70%, the first such reduction since 1993. The move was aimed at conserving cash, but sent Harley’s shares down 8%. in a move that was aimed at conserving cash. And the Dow Chemical Co. (DOW)– facing credit-market uncertainty, lower product demand and legal problems related to a failed joint venture – yesterday cut its dividend 64%, the first such move in the company’s 112-year history.

But there are still hundreds of companies holding their ground in the global financial crisis.

These firms understand that continued growth and success depends on a large body of investors. And to keep them on board the companies must maintain – and hopefully increase – their dividend payouts.

DRIPS Aren’t Dropping

With the stock market’s wrenching decline, many company’s shares are trading at bargain levels. A company that’s been able to maintain its dividend usually represents a better value to its shareholders.

In the reverse situation, where stock values soar, dividend yields fall, meaning income investors have to settle for lower returns.

So, with stocks down and yields high, income investors should consider starting or stepping up dividend reinvestment plans (DRIPS).

In DRIPS, the dividends investors would normally receive as cash are reinvested back into the stock under their name. To start, investors often don’t even need as much as the price of a full company share.

For example, if you invest $20 in a stock that trades for $100 per share, the DRIP will buy you one-fifth of a share of that stock. The dividend is reinvested accordingly, as well.

Over time, money is reinvested back into the stock, giving you more shares. And with more shares, the more dividend income you’ll receive.

Among other advantages, although there is usually a nominal transaction cost involved, the DRIPS’ automatic reinvestments allow investors to skip full-blown brokerage fees, which aren’t conducive to such small purchases.

Among the cons, most DRIPs require investors to be registered shareholders, which entails a little more paperwork than being a regular, or beneficial, shareholder. To enroll in a DRIP plan, investors must buy shares through a transfer agent. The process can take up to eight weeks before your account is opened and fully registered.

Some DRIP companies also have maximum amounts you can invest and hold in their stock. And they vary by time periods – monthly, quarterly, annually and lifetime.

For the public companies that offer the dividend plans, DRIPs provide a stable base of long-term shareholders. And often, these value-minded investors tend to buy more when share prices are down, as opposed to short-term traders, who are apt to bail out on a price decline.

For example, 71% of chemical company RPM Inc.’s (RPM) shareholders are enrolled in its DRIP. And more than 64% of Aflac Inc.’s (AFL) shareholders are enrolled in its DRIP, according to DRIP Central.

More than 1,600 public companies and American Depository Receipts (ADRs) have DRIPs, offering a wide choice of industry and market preference to potential investors.

But with so many to choose from, targeting the best ones can be a challenge without a broker helping you.

The Best DRIPs are…

The best DRIPs are from companies that have a high-yield and a track record of increasing their dividends.

In addition to RPM and Aflac, here are a few DRIP companies to keep your eye on. Not only have they hung onto their dividends in the worst financial crisis since the Great Depression, some have increased their payouts.

• Coca-Cola Co. (KO): There’s a reason “Coke” is the second most recognizable word in the world. The world’s biggest beverage-maker recently beat fourth-quarter earnings expectations, largely due to its ability to cut costs and promote demand with a rotating file of products. The company kicks out a 38-cent dividend every quarter. At its current share price of around $44.30, that’s a 3.45% yield. If that’s not enough, know that Warren Buffet owns 8.6% of the company.

• Intel Corp. (INTL): Intel is the market leader among chipmakers, dominating its competition by continually being the first to the market with the best product. It pays a 14-cent dividend every quarter, which at its current stock price represents a 4.07% yield.

• The Hershey Co. (HSY): The Pennsylvania-based candy and food maker has been a recession stalwart. It began paying dividends in 1930 – meaning it’s been making the quarterly payouts longer than most companies have even been around – and has been increasing them for 32 consecutive years, according to The Money Paper. Right now, its 30-cent quarterly dividend represents a yield of 3.32%. With its stock hovering a few dollars above its 52-week low, many of its DRIP investors are probably loaded up on Hershey shares like Halloween candy.

• Microsoft Corp. (MSFT): Microsoft is the largest software producer in the world, and has a firm grip on that title. The slowing demand for computers and computer software has taken a toll on Microsoft, but the projection of the industry and Microsoft’s dominance makes it one of the most stable tech stocks out there. Its current dividend yield is 2.72% on its shares, which kick out a 13-cent dividend every quarter.

• Exxon Mobil Corp. (XOM): Like the above companies, Exxon doesn’t need much of an introduction. The oil giant is one of the world’s largest companies, having paid investors dividends since 1882. Its 2.13% yield isn’t the highest in this small group of companies, but Exxon’s share price is one of the most stable.

If that’s not enough, here’s an extensive list of DRIP companies, and their minimum and maximum investment requirement.

It also details how much dividend income a company pays, how often, how long its paid dividends and whether it increased its dividend over time.

Editor’s Note: This is the latest installment of a new series that will explore ways for investors to recover from the U.S. financial crisis.

Source: For Dividend-Seekers, Financial Crisis Means it’s Time to Dip Into DRIPs

If you haven’t got the means to invest in a European stocks, Americans can play this sweet deal with the local pink sheet offering – Barry Callebaut AG R (PINK:BYCBF).

More from Taipan Daily:

I just can’t take it any more.

I have been writing about this collapse in one column or another for years now. At first it was warnings about our profligate ways. Then it was the first few teasing leading indicators.

And for the last year? Nothing but nonstop guts and gore. An endless cadence of corporate losses… falling share prices… bank failures… closing stores… shrinking GDP… failing employment…

Quite frankly, it’s getting on my nerves.

Cold Comfort

Of course, the shorter days and colder weather don’t help much either. The only “top down” driving I can look forward to for the next few months will be on the tractor -clearing snow off a quarter mile of private road.

It’s time for a change of pace.

My wife has a cure for times like these. On a high shelf in the kitchen, far beyond the reach of our children’s sticky little fingers, she keeps a private stash. Too little sunlight, frightening times and too many bills can’t just beat down the buzz… of high-grade Swiss chocolate.

So today, I am going to steal a page out her book.

Time to Change Our Outlook

I am only going to mention “stagnating sales” once more. Because I have uncovered a business that has found a delightful way around the whole issue. In fact, even their product is pleasant. Even tasteful, as it were.

The folks who run the world’s largest bulk chocolate maker, Barry Callebaut AG (SWF:BARN), are also tired of Europe’s stagnating chocolate sales. But rather than wallow in a mawkish funk, they are looking to start up production somehow, someway in Brazil.

Seems that Latin America was the one market they had not thoroughly penetrated. And Brazilians in particular are devils for the stuff lately. Just as consumption in Europe is falling off, Brazilians are craving 15% more (at least as of 2007, anyway, which is the most up-to-date info available from the Brazilian Association of Cacao, Chocolates, Candies and Byproducts Industries).

The Old “Can-Do”

In times like these, you just have to love Barry Callebaut AG CEO Patrick De Maeseneire’s “can do” attitude. When grilled by a reporter from Bloomberg, he responded with perfect self-confidence: “This crisis will be more severe than any I’ve known, and it will take longer to recuperate, but knowing that, you have to prepare yourself for the end of the crisis.”

Now De Maeseneire is no Warren Buffett, mind you. He’s not an investing genius in charge of trillions of dollars worth of floundering U.S. shares. But he does mind his $2.7 billion chocolate empire rather well.

Recent deals with his fellow Swiss outfit, Nestlé SA, local hero Hershey Co. (NYSE:HSY), Unilever (NYSE:UL) and even Kellogg’s (NYSE:K) Keebler elves, have boosted the most recent 12 months’ (July 07 through August 08) profits 66% over the previous twelve months. And while even Barry Callebaut was not immune to the massive global downdraft, shares have been rising steadily since last October.

Sunny, Warm and Cheap

Looking back to Brazil, what attracts De Maeseneire is also what has attracted the attention of my fellow editors, Chris DeHaemer and Justice Litle: not only do they want more “stuff” – cars, houses, food, highways, air conditioners, plumbing, whatever – but it is (still) just so damned cheap to get into these markets.

Barry Callebaut plans to spend some 15 million Swiss francs (that’s $12 million American) to either form an alliance with someone local, acquire or just plain build a plant of their own.

Here in the States, you can’t even bribe a congressman for that – pardon me: “fund a congressperson’s campaign,” let alone break ground on a new factory. And even that presumes you could pry a banker’s cold fingers from around that much cash in the first place.

C’est la Vie

If you are interested in buying into this tale of chocolate-powered optimism, and don’t feel up to wiring Europe for the shares, you could always pick up their local pink sheet offering listed as Barry Callebaut AG R (BYCBF.PK).

As with all pink sheet listings, it behooves you to keep an eye on volume before buying, as too many interested parties on any given day could push the price too high.

I will allow Messr. De Maeseneire to close today’s column: “If everything stops, of course the world will stop. I go out with the assumption that the economy will come back.”

Source:  Wall Street Gore… or Swiss Chocolate? What Are You, Nuts?

• Google Inc. (GOOG) said yesterday (Thursday) that profit climbed 26% to $1.35 billion, or $4.24 per share in the third quarter, up from $1.07 billion, or $3.38 per share, at the same time last year. Revenue soared 31% to $5.54 billion.

• Initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000 the Labor Department reported yesterday (Thursday). However, the four-week average, which is less volatile, increased slightly to 483,250 – a seven-year high. The number of people continuing to receive jobless benefits rose 40,000 to 3.7 million.

• Peabody Energy Corp. (BTU), the St. Louis-based company that fuels about one-tenth of all U.S. electricity generation and more than 2% worldwide reported net income of $369 million, or $1.36 cents per share, in the third quarter. That compares with $32.3 million, or 12 cents per share, a year ago.

• Nucor Corp.’s (NUE) third-quarter profit nearly doubled, the Charlotte, N.C.-based steelmaker said yesterday (Thursday). The company reported profit of $734.6 million, or $2.31 per share, compared to $381.2 million, or $1.29 per share, in 2007. Quarterly sales jumped 75 percent to a record $7.45 billion.

• Nokia Corp. (ADR: NOK) announced yesterday (Thursday) that third quarter net profit dropped to $2.7 billion (1.09 billion euros) from 1.56 billion euros a year earlier. Net sales for the Finland-based cell phone maker declined 5% to $16.6 billion (12.2 billion euros) from 12.9 billion euros, BusinessWeek reported.

• Advanced Micro Devices Inc. (AMD) yesterday (Thursday) announced a third quarter loss of $67 million, or 11 cents per share. For the same period the year prior, the memory-chip maker lost $396 million, or 71 cents per share, MarketWatch reported.

• The Hershey Co. (HSY) yesterday (Thursday) announced that its third quarter profit was $124.5 million, or 54 cents per share, up from $62.8 million, or 28 cents per share, in the third quarter of 2007. The domestic candy maker’s revenue increased 6.4% to $1.49 billion due to 25% price increases to help offset higher raw ingredient costs, The Wall Street Journal reported.

• Citigroup Inc. (C) yesterday (Thursday) announced a $2.8 billion loss for the third quarter. North American credit-card loan charge offs increased by $311 million in the quarter, reflecting slower payment rates, higher bankruptcies, rising unemployment and lower recoveries on bad debt, Citigroup Chief Financial Officer Crittenden said on a conference call, Bloomberg News reported. Citi shares lost 33 cents each, or 2.03%, to close at $15.90.

Source: Global Investing Roundups Friday, October 17th, 2008

But in June, when we still believed the credit crisis was just going to mean a couple of years of unpleasant quarterly reports from the financial sector, The Hershey Company (NYSE:HSY) was hitting a 52-week low. The company bottomed at $32.31 as analysts (and the rest of us, too) speculated on the company’s profit margins, what with the rising cost of commodities like cocoa, sugar and soy lecithin.

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Hershey insisted it still saw a 3%-4% sales growth, which, at the time, we didn’t believe. But the company has kept on target with an 11% increase in prices, and a lot of penny-pinching in the production side. Hershey renewed the faith of its followers by holding its dividend at 30 cents in August. And HSY saw a nice pop from rumors it was in talks to sell to Swiss mega-brand Nestle (OTC:NSRGY).

The stock is on a nice dip right now, making it the perfect time to snap up shares on the cheap. But if you do buy in, watch the price carefully. If HSY falls below its most recent bottom of $36.09, sell out. Dipping below its adjusted bottom means its momentum is no longer strong enough to defy the market.

With that being said, Hershey may end up being the perfect recession investment. Chocolate is still cheaper than alcohol, and you won’t get fired for consuming an entire container of Kisses at work.

Source: Hershey (HSY): Kisses Sweeten the Recession

Today’s news gives little hope that oil is heading south anytime soon.

Oil futures contracts on the Nymex this morning stood at just over $141. And according to a report released by the International Energy Agency yesterday, demand for the black goo will grow, despite high prices. This means tigher supply and sustained high prices.

Free Trade Anchored By Surging Oil Prices…

By Byron King

Globalization was the key strategic change in the direction of world development in the 1990s. Fast-rising, and permanently-expensive energy prices are the key strategic change in the world of the first decade of the 2000s.

According to an article in the LA Times, it takes about 7,000 tons of bunker-fuel to fill the tanks of a 5,000-container cargo ship for a trip from Shanghai to Los Angeles.

Since 2005, the cost of that fuel has jumped 87% to $552 a ton, according to the World Shipping Council. This boosts the cost of filling the fuel tanks of a standard-sized cargo ship to not quite $4 million.

So is the price of fuel altering patterns of world trade? Of course it is. Another way of putting it is that rising fuel costs are acting like a “sea anchor” on globalization and world commerce.

Overall, the rising shipping costs from East Asia, due to higher fuel prices, are currently the equivalent of imposing a 9% tariff on East Asian goods entering North America, over the past two years.

If the trends keep on going, then at $200 per barrel the tariff equivalent rate will rise to 15%. So much for “free trade” and “most favored nation” status.

Really, even in a world of rising energy costs, the marketplace still works. Maybe it works with a vengeance. Or at least, the marketplace tells you what OUGHT to work. Public policy can always intervene to screw it up.

In the future, the “most favored” locale will be the one that can produce goods and get them to market at the lowest cost.

According to an official at the Port of Los Angeles headquarters, West Coast ports should gain business in an environment of rising fuel costs. This is because the West Coast ports are 10 to 12 days’ sailing time from Asia, versus the 18-to-20-dayroute from Asia to the East Coast through the Panama Canal. So far so good.

But then again, sea-shipping is still the cheapest way of moving heavy loads, based on cost per ton-mile. Barges are next-cheapest, followed by trains. Trucks are the least efficient part of the movement value chain.

And the discussion of using ports to move goods across the world ohly holds water (so to speak) as long as the Asian goods hold a fundamental production cost advantage.

But West Coast ports could also lose business under some scenarios, for some types of goods. If shipping costs get so out of hand that companies begin shifting production back to North America from Asia, then the ports will certainly lose that volume.

This reverse-migration of production is already happening. In the steel industry, for example, basic production of steel slabs (and also the higher-end value-added steel-making processes like hot-coiled strip), are moving back to North America. This phenomenon has contributed greatly to the rising asset values of U.S. steel-making plants and equipment. Why else would companies like Arcelor-Mittal (AMS: MT), or Severstal be paying premium rices for U.S.-located steel facilities that just a few years ago were wards of the bankruptcy courts?

And higher fuel prices are causing firms to re-think whether they should have large, centralized plants. The question is, should a firm build smaller plants in different areas of the country? The deterioration of the nation’s highway system, as well as clogged railways, makes trans-continental shipping more and more problematic. Hershey Candy (NYSE: HSY) may live to rue the day it decided to close up much of its shop in Pennsylvania and move major operations to Mexico.

Rising fuel costs are also altering local distribution patterns. High fuel prices are forcing restaurants, supermarkets, wholesalers, and upstream food manufacturers to look for suppliers closer to their operations.

Local food-sourcing is sparking a boom in some areas for arable farmland, to include dairy operations, orchards, vegetable-growing operations and smaller-scale feedlots. The benefit for vendors, and ultimately for consumers, is that they will not pay as much for freight. And the food might even taste better. Hey, “real food?” What a marketing concept.

Until we meet again,

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: Free Trade Anchored By Surging Oil Prices…

NEW HIGHS OF NOTE LAST WEEK

Halliburton (HAL)… oil services
Patterson-UTI (PTEN)… oil services
Carbo Ceramics (CRR)… oil services
Atwood Oceanics (ATW)… oil services
Key Energy Services (KEG)… oil services
National Oilwell Varco (NOV)… oil services
Spectra Energy (SE)… gas pipelines
U.S. Steel (X)… you guessed it
Schnitzer Steel (SCHN)… scrap steel
Fluor (FLR)… infrastructure
Quanta Services (PWR)… infrastructure
Crude oil, Natural gas, Gasoline, Corn, Soybeans, Cocoa

NEW LOWS OF NOTE LAST WEEK

JetBlue (JBLU)… airline
US Airways (LCC)… airline
Continental Airline (CAL)… airline
MGM Mirage (MGM)… casinos
Boyd Gaming (BYD)… casinos
Wynn Resorts (WYNN)… casinos
Las Vegas Sands (LVS)… casinos
Monarch Casinos (MCRI)… casinos
Winnebago (WGO)… RVs
Thor Industries (THO)… RVs
Fleetwood Enterprises (FLE)… RVs
Goodyear Tire (GT)… tires
News Corp (NWS)… media
Hershey (HSY)… candy
Playboy (PLA)… eye candy
American Express (AXP)… credit cards
Capital One Financial (COF)… credit cards
International Gaming (IGT)… gambling machines
Circuit City (CC)… landfill stuffing continues to suffer
Veolia Environnement (VE)… world’s largest water stock
Honeywell (HON)… conglomerate
General Electric (GE)… conglomerate
United Technologies (UTX)… conglomerate
XM Satellite Radio (XMSR)… satellite radio
Legg Mason (LM)… asset management
Callaway Golf (ELY)… golf equipment
Whole Foods (WFMI)… expensive groceries
General Motors (GM)… read the letter from the Chairman
Lead, Nickel

Source: Brian Hunt’s Market Notes Monday, June 30, 2008

Closely held Mars Inc. – with a sweet $4.4 billion in debt financing from Buffett and Berkshire Hathaway Inc. (BRK.A, BRK.B) – will acquire U.S. chewing gum icon Wm. Wrigley Jr. Company (WWY), in a deal valued at $23 billion.

“There’s really nothing that can go wrong with something like the Wrigley and Mars brands,” Buffett, 77, said during an interview on the CNBC cable TV network yesterday (Monday). “People are eating more and more of their products every day.”

Mars will pay $80 per share for Wrigley in an all-cash deal, which represents a 28% premium over Wrigley’s Friday closing price of $62.45. With the bid from Mars, Wrigley shares shot up 23%, gaining $14.46 each yesterday to close at $76.91.

Once the deal closes, Wrigley will become a separate Mars subsidiary.

“It’s a great price,” Thomas Burnett, director of research at New York-based Wall Street Access, told Bloomberg News. “Nobody is going to pay more than that. Who is going to go up against Mars and Buffett?”

And there’s possibly a lot more to the deal, sources revealed late last night: By helping Mars buy Wrigley, Buffett may actually be helping himself: As one, big privately held entity, the merged Mars-Wrigley giant would be much easier for Berkshire to buy outright should the secretive family that runs the business ever decide to sell it, sources said.

Whither Hershey?

The Mars-Wrigley merger brings together two all-star confectioners. The Chicago-based Wrigley’s by itself has enough marquee brands to fully stock any candy counter, including the Juicy Fruit, Orbit and Eclipse gums, Life Savers hard candies and Altoids mints. The McLean, Va.-based Mars is vending-machine royalty in its own right, wielding such perennial winners as M&Ms, Twix and Snickers.

Despite their size, both are agile players. Wrigley, for example, is a globally focused innovator, even re-shaping its product portfolio to appeal to regional tastes and cultural customs as it moves into new markets all around the world. Last summer in China, for instance, Wrigley talked about how it combined its traditional products with concepts adapted from traditional Chinese medicine to create such new alternative “flavors” as “beauty” gum, “cooling” gum and “relaxation” gum. Wrigley ended up with a big hit: Despite a sluggish market here at home, such bold moves overseas allowed the company to deliver a 21% jump in profits for that quarter.

The deal could put pressure on Mars rival, The Hershey Co. (HSY), to resume talks about a possible merger with London-based Cadbury Schweppes PLC (CSG). The two candy-making firms have been in sporadic discussions for quite some time over a possible merger, but as yet have been unable to agree on terms.

Candy companies are facing higher raw ingredient costs as the prices of commodities continue to soar. Wrigley’s costs have remained more constant, as the majority of its products do not include dairy, cocoa, or wheat.

In addition to providing the debt financing, Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) will make a minority investment in Wrigley valued at $2.1 billion. It’s believed that Buffett is getting a discount on the Wrigley stake.

A Look Inside Berkshire

Buffett favors companies that have a competitive advantage, offering products or services that can’t easily be replicated by rivals. Businesses like Mars and Wrigley, which have strong consumer brands, fit the bill, Jerome V. Bruni, president of J.V. Bruni and Co., a Colorado Springs, Col.-based investment banking firm, told the Dow Jones Newswires.

This move by Berkshire and Buffett is just the latest in a string of recent deals for the “Oracle of Omaha.” Other recent investments include a stake in Kraft Foods Inc. (KFT) and GlaxoSmithKline PLC (GSK), Europe’s largest drugmaker.

Since taking over Berkshire Hathaway in 1965, Buffett has transformed the once-wheezing textile manufacturer into an investment vehicle that controls an amalgamation of more than 70 portfolio companies and that has a market value of $200 billion.

As of the end of last year, Berkshire owned 3.3% of Procter & Gamble Co. (PG), a consumer-products giant, along with big chunks of The Coca-Cola Co. (KO) and Anheuser-Busch Cos. Inc. (BUD).

Buffett already owns a high-quality confectioner – See’s Candies, a specialty West Coast chocolate-and-candy maker that was founded in 1921 and acquired by Buffett in 1972. Sales were $30 million and pretax profit was less than $5 million that year. In 2007, the San Francisco-based See’s earned $82 million on revenue of $383 million.

In his most recent letter to Berkshire shareholders, Buffett attributed such “extraordinary results” down to See’s “durable competitive advantage.”

Indeed, See’s is representative of the kind of companies that Buffett likes to own – operations such as the Nebraska Furniture Mart, or Borsheim’s Fine Jewelry, which are highly profitable and display strong growth, yet somehow manage to maintain the “feel” of the old-time sole-proprietorship shops that used to occupy the downtown “Main Street” business district in every small town. See’s Candies is a really solid example of that kind of acquisition: Despite its growth, it still sells its confections from several shops it operates, but also does a huge mail-order business from its catalog, which – unlike most U.S. companies – it continues to offer for free.

Once the Mars buyout of Wrigley is concluded, Buffett will own a piece of the chewing-gum maker.

Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) will provide financing for the deal. The financing package consists of about $11 billion from Mars, a $5.7 billion senior debt commitment from Goldman, $4.4 billion in subordinated debt from Berkshire, and the $2.1 billion investment from Berkshire – payable at the time the deal closes, Dow Jones and others report.

When it comes to Berkshire, the one question that arises on an ever-more-frequent basis is that of succession – who will succeed the wildly successful Buffett? Berkshire claims to have such a plan in place.