US: Hershey Rejects Unsolicited Mondelez Takeover Bid

Hershey has rejected an unsolicited bid from Mondelez International, a move that would lead to the creation of the world’s largest confectionery maker.  Mondelez is currently the second-largest confectionery maker in the world in terms of revenue, while Hershey is the fifth-largest, and a combined group would have estimated revenues of $37bn (before any disposals).

Mondelez wrote to Hershey with a bid of $107 per share (half cash, half stock), making the full offer worth around $23bn.  The news sent Hershey’s shares surging by about 17%, while Mondelez saw its shares grow by 6%.

Both companies retained some of those gains despite Hershey’s board unanimously rejecting the bid, adding that it “provided no basis for further discussion.” Any takeover offer requires the approval of the Hershey Trust, which holds 8.4% of its common stock and 81% of its voting power. The Trust has strenuously opposed offers in the past – such as by Wrigley, and Nestle-Cadbury Schweppes – but has declined to comment on the latest offer.

Mondelez’s bid reportedly offered to protect existing jobs, keep the merged entity’s global headquarters in Hershey, Pa., and also rename the new company as Hershey.  The deal is also expected to face few problems from competition regulators, as Mondelez licenses its Cadbury production in the US to Hershey, while the latter has a small presence in international markets.

Any deal could lead to a further shake-up of the industry – Nestlé could reclaim control of the KitKat brand in the US, which is currently licensed to Hershey (which in turn could reduce Hershey’s value to the tune of a reported $3bn).