Oreo Cookie Manufacturer Mondelez to Buy Hershey; Hershey Says No.

The Proposal

On Thursday Hershey shot down a buyout offer from Mondelez, maker’s of the Oreo cookie brand. The buyout would have brought some of the world’s best known cookies and chocolates under ownership of one company.

Hershey confirmed getting a preliminary offer from Mondelez for that offered money and stocks totaling $107 for each share of Hershey Co. common stock. That would bring value the value of the deal to roughly $22.3 billion.

Hershey said that, following an internal review, its board determined the offer provided “no basis for further discussion.” A deal would be subject to approval by the Hershey Trust, a controlling shareholder of the longtime chocolate company.

A Mondelez spokesperson, Valerie Moens, didn’t want to comment on whether the company would make a new offer.

 

The Story Behind the Deal

The Wall Street Journal had reported earlier in the day that Mondelez told Hershey it would take the chocolate maker’s name and move its global headquarters to Hershey, Pennsylvania, but the publication never divulged their sources. Hershey’s shares surged following the report, and closed up nearly 17% at $113.49. Mondelez shares closed up almost 6% at $45.51.

In addition to Oreos, Mondelez International Inc., based in Deerfield, Illinois, owns Cadbury chocolates, Trident gum, Nabisco cookies and Ritz crackers.

The purchase of Hershey would give the combined company 18% of the global candy market and make it the industry’s largest candy manufacturer, according to Euromonitor International. Mars Inc., which makes M&M’s and Snickers, is currently No. 1 with 13.5% of the market.

The deal would also give Mondelez a bigger presence in its home candy market. While Mondelez controls Cadbury abroad, Hershey has the licensing rights to the brand in the U.S. Mondelez gets the majority of its revenue from overseas, while Hershey gets most of their revenue from North America.

J.P. Morgan analyst Ken Goldman said that at least a portion of Mondelez’s rationale for making the bid was probably “defensive in nature,” as the company did not want to be acquired by The Kraft Heinz Co., if Kraft were interested.

Goldman noted that the members of the Hershey Trust have recently found themselves in hot water. Earlier this year, the Philadelphia Inquirer reported that the state attorney general sent the trust a letter seeking the resignation of three board members and the reduction of board compensation. The letter said the compensation exceeded the trust’s policy on compensation.

Kent Jarrell, a spokesman for the trust board, said in a statement the Hershey Trust has a long standing history of working together with the attorney general and that it is cooperating with the recent inquiries. The trust was established by Hershey founder Milton Hershey to benefit the Milton Hershey School for disadvantaged children.

When Heinz recently made the announcement of their plans to buy Kraft last year, executives cited the cost savings that would be gained by combining manufacturing and distribution networks into one larger conglomerate. That deal took place just a couple years after Kraft split with Mondelez in 2012.

 

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