Move to build candy giant fails as Hershey resists
The latest failed acquisition of Hershey Co. has renewed the chocolate maker’s reputation as a company that can’t be bought.
After Mondelez International Inc. abandoned merger discussion son Monday, Hershey shares suffered their worst decline in almost 14 years and left investors with a familiar taste. For years, Hershey has been the subject of takeover speculation. And for years, deal talks have sputtered and died.
The most recent rejection came after Mondelez proposed sweetening its offer to US$115 a share, according to a person familiar with the situation. That was 18 per cent higher than the stock’s price before deal talks were disclosed in June, but Hershey wanted to start the discussions at US$125, said the person, who asked not to be identified because the negotiations were private. Turmoil at the Hershey Trust, the non- profit organization that controls the company, also hampered merger talks.
Hershey, already strug- gling with shifting consumer tastes and an ill-fated expansion into China, may now have also scared away future suitors.
“We do not believe another bidder is likely to emerge for Hershey,” Chris Growe, an analyst at Stifel Financial Corp., said in a report. “We believe Mondelez’s challenge in pursuing Hershey will likely dissuade other buyers from attempting a transaction.”
Mondelez’ s initial US$107-a-share offer in cash and stock would have valued Hershey at about US$23 billion. Hershey’s board said on June 30 that it unanimously rejected that bid. Talks continued, but Mondelez said on Monday that it saw “no actionable path forward toward an agreement.”
The announcement sent Hershey shares down 10.8 per cent to US$ 99.65 on Tuesday, a plunge that erased much of their recent rally. The stock had climbed 25 per cent this year through Monday’ s close, with most of that gain coming when news of Mondelez’s approach became public.
Ending the pursuit of Hershey brought some relief to Mondelez investors, who may have been concerned about a take over battle. Shares of t he Deerfield, Ill.- based company closed up nearly four per cent, at US$ 44.74 in New York on Tuesday.
Mondelez chief executive Irene Rosenfeld, who saw the deal as a chance to create the world’s largest candy company, lamented that the two sides couldn’t reach an agreement.
“Combining our two iconic American companies would create an industry leader with global scale in snacking and confectionary,” she said in Monday’s statement. “While we are disappointed in this outcome, were main disciplined in our approach to creating value, including through acquisitions.”
Hershey owns the Cadbury licence in the U.S ., while Mondelez sells the candy in the rest of the world. Unifying that brand was considered part of the rationale for the merger.