USA – Hershey (HSY) just rejected a €20billion ($23billion) takeover bid by Oreo manufacturer Mondelez (MDLZ). Experts predicted the takeover as a step towards expansion of Mondelez market share in the US.
Irene Rosenfeld, Chief Executive – Mondelez failed to woo the Hershey’s controlling shareholders functioning under Hershey Trust. This $12 billion Hershey Trust was created almost a century ago by the company founders.
The Mondelez – Hershey Takeover Deal
Reese’s Peanut Butter Cups and Hershey’s Kisses manufacturers witnessed this beyond Mondelez’s bid of $107/share and indicated investors to expect a new offer. The bidding was done in cash and stock shares.
This merger of two giant candy makers would have added more value to Hershey’s strong US market share by utilizing Mondelez’s global reach.
Hershey issued a statement saying that the board of directors universally rejected the bidding proposal and are determined that there is no basis for further discussion between the two companies over the issue.
According to the market source, Mondelez failed to convince chocolate maker over existing job preservation and branding issues. Which also led to a lack of interest and trust issues between the companies.
However, the news impacted stock prices positively. Hershey stock prices ended with a hike of 16.8pc at $113.49, while for Mondelez prices rose by 5.9pc to $45.51 this Thursday.
Mondelez, best known for their Oreos cookies, is also second-biggest confectionary manufacturer worldwide. Hershey holds the fifth rank in the same market. According to the market research firm EuroMonitor, this merger would have placed both the companies in the top position. It would have also led to the Mondelez’s governance over Cadbury brand chocolates’ production & Kit Kat’s distribution in the US market. Currently, this license is with Hershey and Mondelez needs to pay the royalties for production.
Kit Kat is manufactured by Nestle globally, however in the US the rights are owned by Hershey which pays Nestle for sales. This Mondelez – Hershey deal would have also empowered Nestle to consider its own proposal for the chocolate maker.
