Hershey rejects Mondelez's $23bn takeover offer

Jul 01, 2016, 10:59 AM EDT
(Source: Michael Kappel/flickr)
(Source: Michael Kappel/flickr)

Hershey rejected Mondelez's $23 billion takeover offer.

Reuters reports:

Hershey Co (HSY.N) said on Thursday it had rejected a $23 billion takeover bid by Mondelez International Inc (MDLZ.O) that would seek to expand the latter's limited U.S. footprint and create the world's largest confectioner. The snub underscores the challenges Mondelez Chief Executive Irene Rosenfeld faces in wooing Hershey's controlling shareholder, the Hershey Trust, a $12 billion charity created by the eponymous company's founder a century ago. The maker of Hershey's Kisses and Reese's Peanut Butter Cups saw its shares trade above Mondelez's bid of $107 per share in cash and stock, indicating investors expected a new offer. A merger of two of the world's top five candy makers would add Hershey's strong U.S. business to Mondelez's global footprint. Earlier, a source said that Mondelez had sought to provide assurances to Hershey that it would keep its name and preserve jobs. Mondelez sees little antitrust risk given the limited geographic overlap of the two companies' businesses, the source added.

The New York Times writes:

Hershey would represent the biggest takeover by Mondelez since its former parent bought Cadbury of Britain in a $19 billion deal more than six years ago. That transaction, too, took time, and Cadbury initially rebuffed the American food behemoth’s advances. Pursuing Hershey is a different matter. A trust holds about 8.4 percent of the candy maker’s shares, but has about 81 percent of the company’s voting power. The shares of the company — both the common and the special Class B shares — are owned by the Milton Hershey School Trust, but are voted on by the Hershey Trust. The Milton Hershey School was founded in 1909 for underprivileged children by the company’s founder and his wife. The trust has flexed its muscle several times over in the last two decades. When the Wm. Wrigley Jr. Company wanted to buy Hershey at a 42 percent premium in 2002, the trust called off the sale at the last minute.

Bloomberg notes:

Should a transaction eventually get done, it would merge the owner of Cadbury with the maker of Hershey chocolate bars and Reese's peanut butter cups. These are big names in chocolate, but for folks wondering whether attempts at combining the two brands would run into antitrust hurdles, the answer is a firm no. A combined Mondelez-Hershey would command only an estimated 18 percent of the global confectionery market, according to Euromonitor International. It helps, too, that the majority of Mondelez's confectionery sales are focused outside North America, while the opposite applies to Hershey.