- Hershey’s board of directors unanimously rejected Mondelez’s takeover bid, the company said Thursday in a statement.
The snack food-giant’s bid was worth approximately $23 billion and would have created the world’s largest candy company. Mondelez offered a mix of stock and cash for the deal, totaling $107 a share of Hershey common stock, according to Hershey’s statement.
- In rejecting the offer, Hershey’s “board determined that it provided no basis for further discussion between Mondelēz and the company," according to the statement.
Hershey's shares rose to 21% to a record high on news of the bid. Rumors of a Nestle takeover of Hershey spiked the confectioner's share price earlier this month, but analysts later squashed speculation of the deal.
Mondelez recently approached Hershey about the proposed takeover via letter, people familiar with the matter told The Wall Street Journal.
The same concerns surrounding the rumored Nestle takeover apply here: Mondelez will need to secure approval for the takeover from the charitable Hershey Trust foundation, which controls 81% of the company's voting power. The trust can block any unwanted buyer and has opposed past attempts to sell the company.
It's unclear whether Mondelez is a more appealing buyer to Hershey than Nestle. Earning the Trust's approval could turn into a hurdle Mondelez will need to overcome by incrementally sweetening its deal, as was seen in other recent takeover bids, such as Anheuser-Busch InBev and SABMiller, or even failed takeover attempts, like McCormick and the UK's Premier Foods.
But Mondelez could already be working on that "sweetness" factor before releasing any official dollar amount for the takeover. Mondelez said it would protect jobs if the deal goes through, relocate its global chocolate headquarters to Hershey, PA, and rename the company Hershey, a person familiar with the matter told WSJ.
In the U.S., antitrust regulators could prove another hurdle. Hershey's U.S. market share was at about 44% as of last year, and Mondelez, which generates about 30% of its global sales from chocolate, owns major chocolate brands like Cadbury. However, almost 75% of Mondelez's business is concentrated outside of North America. A potential Hershey takeover may not raise many antitrust concerns, while also strengthening Mondelez's presence stateside.
In its latest earnings report, Hershey's quarterly sales slid 5.6% to $1.83 billion, the company's third consecutive quarter of sales declines. Mondelez's sales tumbled 17% to $6.46 billion in the most recently reported quarter, its 10th consecutive quarter of falling sales. But the divestiture of its coffee business and currency fluctuations weighed on the total. The company also reported a 71% jump in profits for the quarter.
Neither company has ascribed a dollar amount to the potential deal, though Hershey's value sits around $21 billion as of Thursday morning, according to WSJ. That means Mondelez's offer could be much higher.
When Mondelez was a part of Kraft Food Groups, the company was potential suitor to purchase Hershey back in 2002, CNBC reported. At the time, local residents and students at the Milton Hershey School put an end to any possible deal.
Hershey recently named its president of North America Michele Buck as executive vice president and COO. It's unclear what her role would be following a Mondelez takeover, but she may lend input to the negotiations.