Mondelēz International is exploring the acquisition of chocolate-maker Hershey, Bloomberg News reported on Monday.
The newspaper cited people familiar with the matter, saying the merger would create one of the world’s largest confectioners.
Hershey’s shares – which have a market capitalisation of about $35 billion – rose as much as 19% to $203.03, while Cadbury-maker Mondelēz’s shares were down about 4% in morning trading.
Mondelēz – which is worth about $84 billion – has made a preliminary approach about a possible combination, Bloomberg reported, adding that deliberations were in the early stages and there was no certainty that discussions would lead to a deal.
Both Mondelēz and Hershey declined to comment.
History
The Hershey Trust Company, a charitable trust that benefits the Milton Hershey School, maintains voting control over the Hershey company and its approval is key in any deal.
This is not the first time that Mondelēz has tried to buy Hershey.
In 2016, Mondelēz abandoned its pursuit of the Reese’s Peanut Butter Cups owner after the latter rejected a $23 billion takeover bid.
At the time, Reuters reported that Hershey would not be willing to enter into deal negotiations for an offer less than $125 per share.
Chocolate companies as well as packaged food firms have been under pressure from rising input costs, especially cocoa prices, forcing firms to raise prices, which have in turn led to weakening demand.
Last month, Hershey trimmed its annual revenue and profit forecast after its quarterly revenue dipped to nearly $3 billion due to weak demand.
In contrast, Mondelēz reported a near 2% rise in sales to $9.2 billion in the latest quarter.
The stalling growth at packaged food companies after years of price hikes has created opportunities for deal-making.
‘We’re Likely To See More’
Earlier this year, family-owned Mars said it would buy Kellanova in a nearly $36 million deal in what was – at the time – the year’s biggest deal to date.
Commenting on the potential deal, the chief economist at Annex Wealth Management Brian Jacobsen said, “We are likely to see more of these types of announcements as executives become more confident that a Trump administration won’t pull the rug out from underneath tie-ups.”
President-elect Donald Trump’s return to the White House is expected to fuel a dealmaking revival.
Bankers have said that Trump is likely to wave more deals through that were blocked under the previous administration over competition or US strategic importance concerns.
A potential deal with Hershey will also give Mondelēz a stronger US presence, as its Cadbury and Milka brands are currently top sellers in Europe.
Hershey had the biggest chunk in the US chocolate market in 2022, with nearly 36% of the market share, according to a report from data firm Statista.
Mondelēz’s forward earnings multiple for the next 12 months – a benchmark for valuing stocks – was 18.40, compared with 21.62 for Hershey, according to data from the London Stock Exchange Group.
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