Mars, the world's largest chocolate maker, and the investor Warren Buffett confirmed today that they would pay $23 billion (£11.5 billion) cash for Wrigley in an agreed deal with America's largest chewing-gum maker.

A combined Mars-Wrigley entity would overtake Cadbury Schweppes as the world's biggest confectionery company.

Shares in Wrigley rose 23.5 per cent to $77.13 after the $80-a-share cash deal was announced.

Mars is offering a substantial premium for Wm Wrigley Jr, which had a stock market value of about $17.3 billion at Friday's $62.45 closing price.

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• Bill Wrigley on the deal

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• Meet the Wrigleys

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The offer price represents a 28.1 per cent premium.

Under the terms of the agreement, Wrigley will become a standalone subsidiary of Mars.

Berkshire Hathaway, Mr Buffett's investment vehicle, has agreed to provide financing to Mars for the deal alongside Goldman Sachs and JPMorgan, and will take a minority equity stake in the Wrigley subsidiary.

Bill Wrigley Jr will remain executive chairman of Wrigley, reporting to Paul Michaels, the global president of Mars.

Mr Michaels said: "The strong cultural heritage of two legendary American companies with a shared commitment to innovation, quality and best-in-class global brands provides a great basis for this combination."

He added: "We are looking forward to continuing on our path of growth by jointly developing those values even further.”

Mars will transfer its non-chocolate confectionery brands including Starburst and Skittles to the Wrigley subsidiary.

The deal, subject to regulatory approval, is expected to be completed within six to 12 months.

Wrigley, which generates most of its sales outside the US and has expanded into chocolate and sweets, will bolster Mars's global reach.

Analysts said the greatest synergies were expected to come from rationalisation of the Mars and Wrigley sales forces. Martin Deboo, an analyst with Investec, said: "The real cost synergies will come from Mars's route to market such as combining the two sales forces."

The company, which sells gum under brands such as Extra, Orbit and Airwaves in the UK, was founded in Chicago in 1891.

The deal brings together companies controlled by two dynasties — the Virginia-based Mars family and the Wrigleys, of Chicago.

Mr Buffett is well-known for his preference for strong consumer brands; however, he usually embarks on acquisitions without a partner.

Analysts said that if the deal went ahead, Mars would be the biggest player in the global confectionery industry with a market share of 14.4 per cent, overtaking Cadbury's 10.1 per cent.

Andrew Wood, an analyst with Sanford C. Bernstein in New York, said: "We would expect the synergies from the deal to be big as there is significant geographical overlap (which will allow numerous cost saving opportunities) but very little product overlap that would cause antitrust issues."

The deal could also trigger further consolidation in the global confectionery industry.

Mars's rivals Cadbury Schweppes and Hershey may be forced to rekindle the merger talks that they abandoned last year.

There has been increasing speculation that the demerger of Dr Pepper Snapple Group (DPSG), Cadbury's US drinks business, will trigger bids for the confectionery giant.

The company, which is set to demerge DPSG next month, announced the pricing today of its $1.7 billion senior notes offering, which will be used to finance the spilt.

The average weighted interest rate on the senior notes was 6.8 per cent.

The market was able to get a clearer idea of what price DPSG shares are likely to trade when they debut in May after grey market trading in when-issued shares started on Wall Street today.

The when-issued shares, generated by large investment banks, provide holders with an option to invest in DPSG before its shares officially begin trading on May 7.

Investec's Mr Deboo said the so-called shadow shares were trading at between $25 and $25.50 at the start of grey-market trading. "This pricing is broadly in line with market expectations," Mr Deboo said.

The standalone Cadbury confectionery business will start trading on May 2.

Shareholders with 100 Cadbury Schweppes shares will receive 64 Cadbury shares and 12 DPSG shares when the group demerges.

Cadbury also reiterated its long-term guidance today of revenue growth in the 3 per cent to 5 per cent range, high single-digit earnings per share growth and capital expenditures of about 5 per cent of sales.

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