Mondelez exploring takeover of US chocolate maker Hershey

MONDELEZ International, the snacks and sweets company, is exploring an acquisition of iconic US chocolate maker Hershey, in a potential deal that would create a food giant with combined sales of almost US$50 billion, according to sources familiar with the matter.

Chicago-based Mondelez has made a preliminary approach about a possible combination, said the sources, who asked not to be identified because discussions are private.

Shares in Hershey rose as much as 19 per cent on Monday (Dec 9) for their biggest intraday gain in more than eight years after the Bloomberg News report. The stock was trading up about 14 per cent at 12.49 pm in New York, giving the company a market value of US$40 billion. Mondelez fell 2 per cent, giving it a market capitalisation of roughly US$82 billion.

It’s not the first time Mondelez has sought a deal for Hershey. In 2016, it walked away from discussions about a potential takeover after seeing a US$23 billion bid rejected by the chocolate maker.

Hershey has a value of roughly US$45 billion including debt, Bloomberg-compiled data show. That means a takeover of the Hershey, Pennsylvania-based company would top the value of the year’s biggest deal – snack maker Mars’s agreement to buy Kellanova for nearly US$36 billion including debt in August.

Any deal would require the backing of Hershey Trust, which owns almost all of Hershey’s Class B stock, giving it roughly 80 per cent of the voting power at the company. The trust has slowly been selling some of its Hershey shares in an effort to diversify its holdings. If Hershey Trust were supportive of a takeover, Hershey could attract interest from other suitors, the sources said.

Deliberations are in the early stages and there’s no certainty that discussions will lead to a deal, the sources said. A representative for Mondelez declined to comment. A representative for Hershey said the company does not comment on market rumours. A spokesperson for Hershey Trust could not immediately be reached for comment.

The packaged food industry has been grappling with declining volumes, slowing growth and a weakening global consumer. Companies are looking to innovation and new markets to bolster sales as shoppers start to push back on price hikes and become more health-conscious – a trend that could lead to consolidation.

Global snack powerhouses such as Nestle, which owns KitKat and Smarties, could be among the potential buyers of Hershey, according to Arun Sundaram, an analyst at CFRA Research.

Mondelez makes Ritz crackers and Oreo cookies as well as Toblerone chocolate bars. The company is “receptive to acquisitions” and has the debt capacity for M&A as it looks to expand its chocolate, biscuits and baked snacks divisions, analysts at Bloomberg Intelligence wrote in September. The company in October reported third-quarter earnings that beat estimates.

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 an acquisition of Sour Strips.

The company, led by chief executive officer Michele Buck, has been hit by record-high cocoa prices, which have come down from their peaks but remain significantly elevated compared with prior years. Sugar costs are also high. Last month, Hershey cut its outlook for net sales growth and earnings, as inflation-weary consumers watch their budgets. Its chief financial officer Steve Voskuil has said that cocoa would be the “biggest piece” of the firm’s cost inflation in 2025.

New York cocoa futures had slumped for some time after peaking in April near US$12,000 a tonne but are back on the rise again, raising risks for chocolatiers that need to rebuild hedges and stockpiles. The most-active contract rose as much as 6.1 per cent on Monday to US$10,454 a tonne, the highest intraday level since late April.

“The deal would enhance Mondelez’s purchasing power in the cocoa market, helping it manage rising price pressures more effectively,” said Randal Kenworthy, the consumer and industrial products practice lead at consulting firm West Monroe. “It would also strengthen Mondelez’s access to the US market, leveraging Hershey’s robust brand presence in North America, while creating avenues for expansion into Europe.” BLOOMBERG