Mondelēz Reportedly Exploring Hershey Takeover

Mondelēz International is exploring a possible acquisition of candy and snack rival Hershey, according to a Bloomberg News report citing private sources familiar with the matter. The combination would bring together such brands as Oreo, Ritz, Reese’s and SkinnyPop and generate annual sales of almost $50 billion.

According to Bloomberg, The Hershey Company has a value of roughly $45 billion, including debt – making a potential deal bigger than Mars’ agreement this year to snap up Kellanova for nearly $36 billion.

The news helped push shares of Hershey up as much as 19% during morning trading today, while shares of Mondelez dipped about 4%, per Reuters. Mondelez is valued at around $84 billion.

This wouldn’t be the first time Mondelēz tried to buy Hershey. In 2016, Mondelēz offered to acquire the latter business for $107 a share in a transaction valued at $23 billion. Hershey rejected the bid, indicating it would not negotiate a deal for an offer of less than $125 per share. Mondelēz moved on from discussions, noting there was “no actionable path forward toward an agreement.”

Any transaction would need to be approved by the Hershey Trust, which maintains voting control and has opposed selling the company previously.

Hershey faces uncertainty and structural risks, including elevated cocoa prices and impacts of weight loss drugs, factors that Jefferies analysts believe make a transaction more probable than eight years ago, according to a research note published today. Last month, Hershey downgraded its fiscal year guidance after high input costs and increased pressure across all segments dragged down its third-quarter earnings.

During an earnings call in November, president and CEO Michele Buck said that while Hershey’s categories “remain relevant to consumers,” its performance has been “impacted by both industry-wide and Hershey-specific challenges,” including consumers’ budgetary trade-offs and evolving shopping habits related to ongoing inflationary pressures.

Mondelēz, meanwhile, posted strong third-quarter results as sales and volume growth remained steady amid a host of challenges including volatile cocoa prices and changes to consumer demand in the wake of continued high grocery costs.

Given Mondelēz’s limited footprint in the North American chocolate market, there is little overlap across portfolios, according to Jefferies. Mondelēz would also increase its exposure in the convenience channel with the addition of Hershey’s business. Additionally, Mondelēz could generate more synergies with its company-owned U.S. direct-store delivery infrastructure. Analysts also see potential for co-branded innovation opportunities if the transaction transpires.

Executives for both companies haven’t commented on deal rumors.

This is a developing story.