Mondelez International, the snacks and candy group, on Thursday made a $ 23bn bid for Hershey, the rival US confectionery maker of chocolate bars, Reese’s Peanut Butter cups and Hershey Kisses.
The maker of Oreo cookies and Cadbury chocolate sent a letter to the Pennsylvania-based group promising to preserve Hershey’s distinct corporate culture and local jobs, said two people briefed about the contents of the proposal.
They added that Mondelez would seek to rename its business, with the combined group to be called Hershey. Two people briefed on the negotiations said that Mondelez had made a cash and stock offer valuing Hershey at $ 107 a share.
On Thursday afternoon Hershey “unanimously” rejected the takeover approach. In a short statement it said that the offer provided no basis for further discussion with Mondelez.
The approach comes as Mondelez is looking to capitalise on the relatively high value of its stock compared with its peers and a period of turbulence at the Hershey Trust, which controls around 80 per cent of the voting rights in the company that was founded in 1894.
Bankers following the situation also said the move highlighted the concern at Mondelez, which has a market value of $ 69bn, that it may find itself the target of a future bid by the Kraft Heinz Company, which is controlled by private equity group 3G Capital and Warren Buffett’s Berkshire Hathaway.
Even if Mondelez managed to win the support of Hershey’s board, a deal would face significant hurdles to being completed. Mondelez would need to win the backing of Hershey’s Trust, which effectively controls the company, as well as the support of the attorney-general of Pennsylvania.
One of the people briefed on the negotiations said Mondelez’s cash-and-stock offer was pitched at $ 107 a share, valuing the company at $ 23bn. Hershey’s shares closed at $ 97.40 on Wednesday and surged by more than 20 per cent on Thursday to $ 117.79 when news of the offer was first reported by the Wall Street Journal. Mondelez’s shares rose 1.3 per cent to $ 43.59.
The offer comes amid speculation over Hershey’s future, including a rumour that Nestlé may also be interested in buying the company.
The global food industry has been transformed in recent years as changing consumer tastes have forced companies to rethink their strategies by consolidating and cutting costs.
A combination of Mondelez and Hershey would give the Deerfield, Illinois-based company 18 per cent of the global confectionery market, usurping rival Mars, and make it the second-largest packaged food manufacturer in the world, with 3 per cent of total sales, according to Euromonitor.
“This is a highly ambitious move by Mondelez given the symbolic status of the Hershey brand in the US,” said Jack Skelly, Euromonitor food analyst.
Mondelez declined to comment and Hershey could not immediately be reached for comment.
In an industry undergoing so much change, there had also been speculation that activist investors could try to eventually engineer a combination with PepsiCo’s Frito-Lay snacks division, even though Nelson Peltz’s Trian Fund Management abandoned its public push for a combination when Mondelez allowed him on to its board.
Additional reporting by Scheherazade Daneshkhu