(Bloomberg) — Snacks and confectionery company Mondelez International Inc. is exploring acquiring Hershey Co., the iconic U.S. chocolate maker. The deal would create a food giant with total sales of nearly $50 billion, the people said. I am well aware of the issue.
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Chicago-based Mondelez said it had taken a preliminary approach to possible combinations. The people spoke, asking not to be identified because the discussions are private.
Shares of Hershey Co. rose as much as 19% on Monday, the biggest intraday gain in more than eight years following the Bloomberg News report. Shares were up about 14% at 12:49 p.m. in New York, giving the company a market value of $40 billion. Mondelez fell 2%, giving its market capitalization about $82 billion.
This isn’t the first time Mondelez has sought a deal for Hershey Co. In 2016, the chocolate maker withdrew from discussions about a potential acquisition after rejecting a $23 billion bid.
Hershey Co. is worth about $45 billion, including debt, according to data compiled by Bloomberg. That means the Hershey, Pa.-based company’s acquisition would surpass the value of snack maker Mars Inc.’s agreement to buy Kellanova last August for nearly $36 billion, including debt, the largest deal of the year. do.
Any transaction would require the support of Hershey Trust Co., which owns substantially all of Hershey Co.’s Class B stock and gives it about 80% of the company’s voting power. In an effort to diversify its holdings, the trust company acquired Hershey Co. We have been slowly selling off some of our stocks. If Hershey Trust supports the acquisition, Hershey Co. could attract interest from other suitors, the people said.
“Deliberations are at an early stage and there is no certainty that the discussions will lead to negotiations,” the official said. A Mondelez spokeswoman declined to comment. A Hershey Co. spokeswoman said the company does not comment on market rumors. A Hershey Trust spokeswoman could not immediately be reached for comment.
What Bloomberg Intelligence Says
Mondelez’s renewed interest in Hershey could lead to a transformative deal that would boost its global chocolate market share to more than 21%, according to a Bloomberg News report. But there are obstacles. Hershey’s enterprise value is $45 billion compared to Mondelez’s $25 billion proposed in 2016, and approval from the Hershey Trust is required due to its dual-class share structure. Given the FTC’s resistance to large transactions, FTC approval could be another challenge.
— Jennifer Bartashus and Jibril Lawal, analysts
Click here to view the study.
The packaged food industry is suffering from declining volumes, slowing growth and weakening global consumers. As shoppers push back on price increases and become more health-conscious, companies are looking to innovation and new markets to boost sales. This is a trend that could lead to consolidation.
Global snack powerhouses such as Nestle SA, which owns KitKat and Smarties, could be among Hershey Co.’s potential buyers, according to Arun Sundaram, an analyst at CFRA Research.
Mondelez makes Ritz crackers, Oreo cookies and Toblerone chocolate bars. Analysts at Bloomberg Intelligence wrote in September that the company is “receptive to acquisitions” as it seeks to expand its chocolate, biscuit and baked snacks segments and has debt capacity for M&A. Last October, the company reported third-quarter results that beat expectations.
Founded in the late 19th century, Hershey Co. is known for its chocolate and candy brands, including Hershey’s Kisses, Reese’s Peanut Butter Cups and PayDay. In November, it expanded its confectionery portfolio with the acquisition of Sour Strips.
The company, led by CEO Michele Buck, has been hit by record-high cocoa prices. Cocoa prices have fallen from their peak but remain significantly higher than in previous years. Sugar costs are also high. Last month, Hershey Co. lowered its net sales growth and profit outlook as inflation-weary consumers watched their budgets. Chief Financial Officer Steve Voskuil said cocoa will be the “biggest part” of the company’s cost inflation in 2025.
New York cocoa futures peaked near $12,000 a tonne in April and then fell for a while, but are back on the rise, raising risks for chocolate makers who need to hedge and rebuild reserves. The most active contract rose as much as 6.1% on Monday to $10,454 per tonne, the highest intraday level since late April.
“This transaction will strengthen Mondelez’s purchasing power in the cocoa market, helping it better manage rising price pressures,” said Randal Kenworthy, director of the consumer and industrial products practice at consulting firm West Monroe. “It will also leverage Hershey’s strong brand presence in North America to strengthen Mondelez’s access to the U.S. market while paving the way for expansion into Europe.”
–With assistance from Michelle F. Davis, Ruth David, Deena Shanker, and Ilena Peng.
(Updates comments from Mondelez and adds analyst comments and cocoa prices in seventh paragraph.)
