It could be the second bid Mondelēz International makes for The Hershey Company; the first was in 2016 for a hefty $26bn. But, if reports of a takeover try are true, Mondelēz could be a bit more desperate for Hershey this time round.
Mondelēz is hellbent on being a snacking giant - that’s no secret. The ‘big confec’ business has been on a spending spree in recent months and years, effortlessly snapping up cakes, pastries and snacking companies.
It “has a right” to play in this market, with natural crosses and synergies for its core brands, like Milka and Oreo, says boss Dirk Van de Put.
However, Mars' $35.9bn bet on Kellanova was a clear shot across the bow for Mondelēz, which is why many city analysts speculate the chocolate giant’s interest in The Hershey Company and its two power brands – Hershey and Reese’s – is a little more desperate this time round.
How many buyout attempts of The Hershey Company?
But The Hershey Company is coy when it comes to takeover bids, having seen off three in the past 22 years, down to The Hershey Trust seeking to maintain control.
However, “today the company is in a more vulnerable position, which we think could lead to a change of heart”, says Robert Moskow, MD at multinational investment bank TD Cowen.
While Mondelēz may be in a more vulnerable position than it was this time last year – it’s shares have seen declines of late, with values reduced only yesterday – Hershey has its own problems.
Along with other confectionery business pressures – GLP-1 uptake, increasing cocoa costs and other cost hikes – it doesn’t have the scale or knowhow to grow internationally like Mondelēz.
Its potential new owner has the muscle and logic to take Hershey and Reese’s global, but also it would allow Mondelēz the opportunity to grow into the US market.
Combined, the two businesses could offset rising cocoa costs that can’t be countered by price increases alone, says Moskow.
But it’s getting rid of the problem in Mondelēz’s periphery that will be the big win for the Cadbury chocolate brand owner.
Why Mars Kellanova is a snacking competitor
“Mars' acquisition of Kellanova could make Mars a more formidable competitor over time,” says Moskow. “The acquisition came as a surprise, because most in the industry expected Mars to expand into pet and meals, not snack.”
Though, this is all speculation. It is believed Mondelēz International has approached The Hershey Company, with neither responding to media enquiries.
Business analysts remain sceptical a deal will be struck, though cite significant value in it, as Hershey’s and Reese’s current growth shows there’s potential in other markets. In comparison, Mondelēz is pretty well established.
Gossip of the deal sent markets spinning, too. Hershey’s shares ballooned 11% yesterday following Bloomberg’s reports. Mondelēz’s, however, shrank 2.2% – another sign of its increasing need to take on the business.
So, would a Mondelēz-Hershey business be large enough to compete with Mars Kellanova? In short, yes. At a combined market value of near $120bn, it would eclipse the competition.
