The acquisition meets three of Wrigley's strategic goals. It boosts the core chewing gum business by adding strong bubble gum brands like Boomer. It also diversifies the company's offerings into both chewy and hard candies, including lollipops. Finally, it expands Wrigley's business in developing markets like China and India.
While it is refreshing to see a corporate acquisition match a company's strategic goals, it is just as satisfying to see an acquisition that will be accretive to earnings as early as 2005. Wrigley isn't buying troubled assets here.
Notably, this is the first acquisition since Hershey
No stranger to The Motley Fool, Wrigley is one of the sweetest successes in the food industry. After all, this is a company that enjoys gross and operating margins of 58% and 21%, respectfully. Compare that to an industry average of 27% gross and operating margins of a paltry 7%.
Moreover, at 28 times trailing earnings, the stock isn't terribly overpriced relative to its peers. Tootsie Roll
With free cash flow of over $300 million, no debt, and a 1.56% yield, Wrigley offers investors a pack of positives to chew on. As Jackie Gleason would say, "How sweet it is."
W.D. Crotty does not own any of the stocks mentioned. To discuss your favorite stocks, or just to see what other investors are saying about your stocks, join The Motley Fool discussion boards. For a 30-day free trial, click here.