Hershey stock spikes on Nestle takeover rumor

Dive Brief:

  • Hershey saw a spike in stock market activity Thursday after rumors emerged about a potential Nestle takeover.
  • Hershey did not comment on the speculation, which it said was company policy.
  • The rumor has so far been unsubstantiated, but it sent Hershey's shares up over 3% in the morning trading hours. The rumor also had call volume soaring by 38 times its normal level.

Dive Insight:

This isn't the first time Nestle and Hershey have been tangled in takeover talks. Back in 2002, when Hershey the trust that owned it put it up for sale, Nestle had been named as a possible buyer. However, both companies' executives acknowledged the difficulties that the deal would have getting past antitrust regulators — an issue that would surely plague a takeover now, pending divestitures. At the time, Hershey owned about 43% of the U.S. chocolate market, and Nestle owned 12%.

Hershey's U.S. market share has remained steady, at about 44.4% as of last year, so the same regulatory issues could surround a takeover today. Mars holds about 29.5% of the U.S. chocolate market. A Hershey takeover would give Nestle a No. 1 spot in the U.S. chocolate market and solidify its dominance in other markets, such as Canada.

Nestle has also been looking for ways to meet its revenue growth targets, which the company has missed for the past three years. On one end are efforts like medical foods and health and nutrition initiatives. But on the other is feeding on indulgence demand.

Hershey could also use a boost, after recently reporting its third consecutive quarter of sales declines. Hershey remains a chocolate and confections company first and foremost, but it has explored a diversification strategy that includes recently expanding its 2015 acquisition of Krave jerky with a new protein bars line and launching its SoFit brand of better-for-you snacks.

Hershey also announced last month its acquisition of the company owning the barkTHINS brand, which builds on Hershey's efforts to expand its offerings in the premium chocolate market. A Nestle takeover would bring Hershey's brands to a more global scale, as currently, North America accounts for about 85% of the company's revenues.

Filed Under: Corporate