Corporate & Securities Law

Mars-Wrigley Pending Acquisition: Are the "Strategics" Now Emulating the "Financials"?

By broc

Mars-Wrigley Pending Acquisition: Are the "Strategics" Now Emulating the "Financials"?

From Cliff Neimeth of Greenberg Traurig: Here is the merger agreement for the Mar's pending acquisition of Wrigley. Query whether this is indicative of the new strategic purchaser mindset in mega business combinations - or just a stand-alone deal?

At a minimum, the deal reflected in the attached merger agreement offers an interesting insight into the current (and perhaps offers a more prescient glimpse into the mid-term future?) state of the M&A financing market.

Most uncommonly, the merger agreement providing for Mars' strategic $23.0 billion acquisition of Wm. Wrigley Jr. Co. contains some of the seller risk allocations and limitations on equitable remedies, financing covenants and reverse break-up fee provisions that sellers tolerated during the 2005-mid-2007 wave (and subsequent "trickle") of private equity-sponsored buyouts.

Specifically, Wrigley has no general right to seek specific performance of Mars' performance obligations under the merger agreement; Mars has agreed to pay a $1.0 billion reverse break-up fee to Wrigley (i.e., an absolute cap on its damages, in prescribed circumstances); and a financing covenant that expressly excludes Mars' obligation to sue its lenders to enforce their commitments. (NB: Warren Buffet's Berkshire Hathaway is one of Mars' financing sources).

Time will tell whether this becomes more common in large cap strategic deals...

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Full post as published by DealLawyers.com Blog on July 14, 2008 (boomark / email).