Cadbury-parent Mondelez International is exploring the acquisition of chocolate maker Hershey, Bloomberg News reported on Monday, citing people familiar with the matter, in what would create one of the world’s largest confectioners.
Shares of Hershey, which has a market capitalization of about $35 billion, rose as much as 19% to $208.03, while those of Mondelez were down about 4% in morning trading.
Mondelez, which is valued at around $84 billion, has made a preliminary approach about a possible combination, Bloomberg reported, adding that deliberations were in the early stages and there was no certainty that discussions would lead to a deal.
Both Mondelez and Hershey declined to comment.
The Hershey Trust Company, a charitable trust that has as its sole beneficiary the Milton Hershey School, maintains voting control over The Hershey Company and its approval is key in any deal.
This is not the first time that Mondelez has tried buying Hershey.
In 2016, the maker of Oreo cookies and Cadbury chocolate maker abandoned the pursuit of Reese’s Peanut Butter Cups owner after the latter rejected a $23 billion takeover bid.
At the time, Reuters had reported that Hershey would not be willing to enter into deal negotiations for an offer of less than $125 per share.
Chocolate companies as well as packaged food firms have been under pressure from rising input costs, especially cocoa prices, forcing firms to raise prices, which have in turn led to weakening demand.
Last month, Hershey trimmed its annual revenue and profit forecasts after its quarterly revenue dipped to nearly $3 billion due to weak demand. In contrast, Mondelez reported a near 2% rise in sales to $9.2 billion in the latest quarter.
The stalling growth at packaged food companies after years of price hikes has created opportunities for deal-making.
Earlier this year, family-owned candy giant Mars said it would buy Cheez-It maker Kellanova K.N in a nearly $36 billion deal, bringing together brands from M&M’s and Snickers to Pringles and Pop-Tarts in what was at the time the year’s biggest deal to date.
“We are likely to see more of these types of announcements as executives become more confident that a Trump administration won’t pull the rug out from underneath tie-ups,” said Brian Jacobsen, chief economist at Annex Wealth Management.
President-elect Donald Trump’s return to the White House is expected to fuel a dealmaking revival. Bankers have said that Trump is likely to wave more deals through that were blocked under the previous administration over competition or U.S. strategic importance concerns.
A potential deal with Hershey will also give Chicago-based Mondelez a stronger presence in the chocolate market in the United States, the world’s biggest consumer of the cocoa-based confection. Mondelez’s chocolate brands, Cadbury and Milka, are top sellers in Europe.
Hershey had the biggest chunk of the U.S. chocolate market in 2022, with nearly 36% share, according to a report from data firm Statista, followed by Mars, which had a near 30% share of the U.S. market.
Mondelez’s forward earnings multiple for the next 12 months, a benchmark for valuing stocks, was 18.40, compared with 21.61 for Hershey, according to LSEG data.
Source: Reuters.com