New York: US chocolate candy maker Hershey said on Thursday that it had rejected a $23 billion takeover bid from snack-food giant Mondelez, whose brands include Cadbury chocolate bars and Lu cookies. A combination of the two US companies would surpass Mars as the leader in the global candy sector, according to Euromonitor. It would also jump far ahead of food companies like Nestle and Ferrero, now in respective third and fourth places.
The new company would be a heavyweight on foreign markets — Mondelez International’s strength — and on the American market, thanks to The Hershey Company’s mass-market appeal.
The Hershey board of directors said it “carefully reviewed” a bid of $107 per share for the company and “determined that it provided no basis for further discussion between Mond-elez and the company.”
A deal with the much-smaller Hershey would have enhanced Mondelez’s chocolate holdings in the US, where it is better known for products such as Oreo cookies and Ritz crackers. Nestle, which had given Hershey a license to produce Kit Kats in the United States, could make an offer, analysts said, but a merger might face regulatory challenges.
The Swiss food giant also could terminate its partnership with Hershey, which would reduce the US company’s value. Hershey reported $7.4 billion in sales in 2015, while Mondelez had $29.6 billion. However, any acquisition deal would require support from the Hershey Trust, created by company founder Milton Hershey. The trust is chartered by the state of Penn-sylvania and holds about 80 per cent of the company’s common shares.
The Trust has steadfastly opposed a sale of the company in the past, as in 2002 when it torpedoed a $12.5 billion takeover offer from Wrigley, now a unit of Mars. But the context has changed and may now be favourable for Mondelez. The Pennsylvania Office of Attorney General is reportedly investigating allegations of a conflict of interest against current and former trust board members. To reassure local authorities Mondelez would propose to adopt the group’s family name, pledge to set up operations in the region.
