Hershey Rejects Mondelēz's Preliminary Takeover Bid
CHICAGO and HERSHEY, Pa. — The Hershey Co.'s main controlling owner, Hershey Trust Co., rejected Mondelēz International Inc.'s preliminary takeover offer, assessing the bid as too low, according to people familiar with the matter.
As Bloomberg reported earlier this week, Mondelēz was exploring an acquisition of The Hershey Co. in a potential deal that would create a food giant with combined sales of almost $50 billion.
Hershey hired advisors to help it respond to the interest, according to one of the sources, who stated that Mondelēz made the approach shortly after Hershey reported third quarter earnings that missed analyst expectations last month.
Any deal would require the backing of Hershey Trust Co., which owns almost all of Hershey Co.'s Class B stock, giving it roughly 80% of the voting power at the company. The trust has slowly been selling some of its Hershey Co. shares in an effort to diversify its holdings. If Hershey Trust were supportive of a takeover, Hershey Co. could attract interest from other suitors, the sources said.
Mondelēz tried to acquire Hershey in a $23 billion deal in 2016, but the overture was rejected by the trust.
Amid reports of the Hershey buyout, Mondelēz said the company "remains committed to an acquisition strategy that is focused on bolt-on assets" similar to recent acquisitions of Chipita, Clif and Ricolino, as Reuters reported.
Mondelēz's deals with Chipita, Clif and Ricolino in 2022 were all under $3 billion. In contrast, Hershey has a market capitalization of about $38 billion, according to LSEG data.
The Chicago-based company's renewed interest in Hershey, based on a Bloomberg News report, could lead to a transformational deal that bolsters its global chocolate market share to more than 21%. Yet there are hurdles: Hershey's enterprise value is $45 billion vs. the $25 billion Mondelēz offered in 2016, and its dual-class share structure makes approval from the Hershey Trust a must.
Federal Trade Commission clearance may be another challenge, given the agency's resistance to large deals, Bloomberg analysts Jennifer Bartashus and Jibril Lawal said.
Additionally, global snack powerhouses such as Nestle SA, which owns KitKat and Smarties, could be among the potential buyers of Hershey Co., according to Arun Sundaram, an analyst at CFRA Research.
Hershey Co. has a value of more than $44 billion including debt, Bloomberg compiled data shows. That means a takeover of the Pennsylvania-based company would top the value of the year's biggest deal — Mars Inc.'s agreement to buy Kellanova for nearly $36 billion, including debt, in August.
With 2023 net revenues of approximately $36 billion, Mondelēz's brand portfolio includes Oreo, Ritz, LU, Clif Bar and Tate's Bake Shop biscuits and baked snacks, as well as Cadbury Dairy Milk, Milka and Toblerone chocolate.
The Hershey Co. has more than 90 brand names in approximately 80 countries that drive more than $11.2 billion in annual revenues, including Hershey's, Reese's, Kisses, Kit Kat, Jolly Rancher, Twizzlers and Ice Breakers, and salty snacks including SkinnyPop, Pirate's Booty and Dot's Homestyle Pretzels.