Hershey Rejects Mondelez’s $23 Billion Takeover Offer
Hershey Rejects Mondelez’s $23 Billion Takeover Offer
Mondelez
International, whose snacks also run from Nabisco to Cadbury chocolate,
has made a $23 billion takeover offer for Hershey in what would be one
of the biggest deals of the year.
Hersey said on Thursday
that Mondelez had offered to pay $107 a share in cash and stock — a
premium of about 10 percent to Hershey’s closing stock price. Hershey
said that its board had “rejected the indication of interest and
determined that it provided no basis for further discussion between
Mondelez and the company.”
If the two companies strike a deal, it would be among the most prominent in a year that has been lacking in daring deal-making.
Continue reading the main story
Archival coverage of Milton Hershey’s chocolate empire and his company town.
From The Archive | Oct. 14, 1945
The Chocolate King
In 1900, Milton Hershey sold his caramel company
and went on to found his chocolate “company town” in Pennsylvania. “I’ll
stake everything on chocolate,” he pronounced. “Caramels are a fad. The
chocolate market will be a permanent one.”
See full article in TimesMachine
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Buying
Hershey would be the boldest transaction for Mondelez — cleaved from
what was once Kraft — since its former parent bought Cadbury of Britain
in a $19 billion deal more than six years ago.
But
winning Hershey could prove tricky for Mondelez, since the smaller
chocolate maker is effectively controlled by a charitable trust that
owns about 81 percent of the company’s voting power.
The
Hershey Trust, established by Milton Hershey and his wife, Catherine,
in 1905, has opposed takeovers of the company in the past. In 2002, the
trust halted an auction of the company at the 11th hour as it was about
to accept a $12.5 billion deal from Wm. Wrigley Jr. Company.
News of the approach, which was reported earlier by The Wall Street Journal, sent shares in Hershey up 15 percent in trading on Thursday, to $111.87. Shares in Mondelez rose 4 percent, to $44.71.
Hershey’s market value as of Wednesday’s close was $21 billion, while Mondelez’s stood at $69 billion.
Mondelez declined to comment.
Analysts and investors said that combining the two has its merits.
“It’s a surprising move, but it does make sense for Mondelez,” said Jack Skelly, a food analyst at Euromonitor.
Mondelez,
which was spun off from Kraft in 2012, is the world’s second-largest
confectionery company — but it has very little business in the United
States. Hershey, on the other hand, gets more than four-fifths of its
sales in North America.
Additionally,
Hershey owns the rights to make and market Cadbury chocolate — but not
other candies — in the United States, and it took legal action to stop imports of Cadbury chocolates made abroad.
Both
companies have improved profitability over the last several years and
moved into sexier corners of the food business. Hershey, for instance,
bought Krave and got into the increasingly popular jerky business.
Mondelez
bought Enjoy Life Foods, testing the market for gluten-free products.
But the company has come under pressure from activist investors in
recent years, including the billionaires Nelson Peltz and William A. Ackman.
Meanwhile,
rising cocoa prices have made the chocolate business less profitable,
and it’s hard to raise sales of chocolate in the United States, the
world’s largest consumer of chocolate. “Also,” Mr. Skelly said, “it’s
difficult to generate sales because people are starting to think of
chocolate as an unhealthy product.”
Mars,
which is privately held, is the world’s largest confectionery company,
followed by Mondelez. The others in the top five are Nestlé, Ferrero
Group and Hershey.
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