Hershey shares jump on Cadbury owner buyout report
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Hershey's shares rise over 10% following reports that Mondelez is exploring a potential buyout, which could create a $50bn snack food giant. (Luke Sharrett/Bloomberg via Getty Images)
Hershey’s shares surged by over 10% following reports that Mondelez International, the owner of the UK-based Cadbury, had approached the US chocolate giant for a potential buyout. If the deal were to proceed, it could form a snack food powerhouse with nearly $50 billion in combined annual sales.
However, both Mondelez and Hershey have declined to comment on the matter when approached by BBC News. According to Bloomberg, the discussions are still in the early stages, and it remains uncertain whether they will result in a deal. This is not the first time Mondelez has attempted to acquire Hershey; in 2016, Hershey rejected a $23 billion offer from Mondelez.
One key obstacle to any potential deal is the Hershey Trust Company, a charitable trust that holds voting control over the company. The trust has previously blocked takeover attempts, meaning that any merger would need its approval. This makes any buyout or merger more complicated, as the trust’s decision would be pivotal.
A merger between Hershey and Mondelez would bring together some of the most famous names in the confectionery and snack food industries. Hershey is renowned for products like Hershey’s Kisses, Reese’s Peanut Butter Cups, and various other chocolate treats. Mondelez, meanwhile, owns Cadbury and other beloved brands such as Oreo cookies, Ritz crackers, and Toblerone chocolate.
The packaged food industry has been facing challenges recently, with slowing growth due to rising prices. This has especially affected chocolate companies, which have struggled with higher cocoa costs. As a result, many chocolate makers have had to pass these increased costs on to consumers. In fact, Hershey itself revised its revenue and profit projections downward just last month. The company’s chief financial officer, Steve Voskuil, stated that cocoa prices are expected to be the “biggest source of inflation” for the firm in the coming period.
Hershey is not the only food company facing such pressures. Kraft Heinz, another major player in the food industry, also lowered its annual sales and profit forecasts after customers cut back on spending due to price increases. This trend of cautious consumer spending is prompting many companies to seek mergers and acquisitions as a way to boost growth and tap into new markets.
This has led to a wave of consolidation in the food and beverage sector. For example, in August, Mars, the maker of brands like M&M’s and Snickers, acquired Kellanova (formerly Kellogg’s) for nearly $36 billion, which owns popular products such as Pringles and Pop-Tarts. This move reflects the growing trend of large food companies expanding their portfolios to gain market share and reduce the impact of slower growth in traditional areas.
In the coming months, analysts predict that mergers in the food industry could increase further. Some suggest that the upcoming presidential administration, led by Donald Trump, could be more conducive to deal-making, with the president-elect seen as more favorable toward mergers and acquisitions in general. If this proves true, the food sector could see more large-scale deals as companies attempt to position themselves for growth in a challenging market.
While it remains uncertain whether Hershey and Mondelez will strike a deal, the ongoing discussions indicate a shift in the food industry, where consolidation may become a key strategy to cope with rising costs and stagnant sales growth.
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