Snack and candy company Mondelez International is exploring the acquisition of iconic US chocolate maker Hershey in a potential deal that would would create a food giant with combined sales of nearly $50 billionaccording to people familiar with the matter.
Chicago-based Mondelez has made a preliminary approach about a possible combination, said the people, who asked not to be identified because the discussions are private.
Hershey shares rose as much as 19% this Monday (9), their biggest intraday gain in more than eight years, following the report from Bloomberg. Shares were trading up 12% at 10:57 a.m. in New York, giving the company a market value of $40 billion. Mondelez fell 2%, giving it a market capitalization of about $83 billion.
This is not the first time that Mondelez has sought a deal to acquire Hershey. In 2016, the company stepped away from discussions about a possible acquisition after seeing a $23 billion offer rejected by the chocolate maker.
Hershey is worth about $45 billion, including debtshow data compiled by Bloomberg. That means the acquisition of the Pennsylvania-based company would surpass the value of the year’s biggest deal: snack maker Mars’ deal to buy Kellanova for nearly $36 billion, including debt in August.
Any deal would require the support of Hershey Trust Co., which owns nearly all of Hershey’s Class B shares, giving it about 80% of the company’s voting power. The fund has been slowly selling some of its Hershey shares in an effort to diversify its holdings. If the Hershey Trust supported an acquisition, Hershey could attract interest from other suitorspeople said.
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Deliberations are in the early stages and there is no certainty the discussions will lead to an agreement, the people said. A Hershey representative said the company does not comment on market rumors. A Hershey Trust spokesperson could not immediately be reached for comment. A Mondelez representative did not respond to multiple requests for comment.
The packaged food industry has struggled with declining volumes, slowing growth and a weakening global consumer. Companies are looking to innovation and new markets to boost sales as shoppers begin to push back on price increases and become more health-conscious.
Mondelez makes Ritz crackers and Oreo cookies, as well as Toblerone chocolate bars. The company is “acquisition receptive” and has the debt capacity for mergers and acquisitions as it seeks to expand its chocolate, cookie and baked snack divisions, analysts at Bloomberg Intelligence in September. The company in October reported third-quarter earnings that beat estimates.
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Founded in the late 19th century, Hershey is known for its chocolate and candy brands, including Hershey’s Kisses, Reese’s Peanut Butter Cups and PayDay. It expanded its sweets portfolio in November with the acquisition of Sour Strips.
The company, led by CEO Michele Buck, was hit by record cocoa prices, which have fallen from their peaks but remain significantly elevated compared to previous years. Sugar costs are also high. Last month, Hershey cut its outlook for net sales and profit growth as inflation-weary consumers watch their budgets.
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