Mondelez, an American confectionery company famous for its Oreo cookies and REITs crackers, is reportedly trying to acquire Hershey, which produces Hershey chocolate. When the two companies combine, they create a “food dinosaur” with annual sales of $50 billion.
Citing multiple officials, Bloomberg reported on the 10th (local time) that Mondelez International has begun preliminary contact to acquire Hershey. Currently, Hershey’s enterprise value exceeds $44 billion, including debt. If the deal is struck between the two companies, it will surpass Mars’ $36 billion acquisition of Kellanova, which was the largest deal this year. Mars, which makes sneakers, acquired Kellanova, famous for Pringles, in August this year. Mondelez also sought to acquire Hershey for $23 billion in 2016, but was rejected by Hershey.
Whether the acquisition will go through or not depends on securing support from the Hershey Trust. The Hershey Trust holds most of Hershey’s “Group B” stocks, which exercise about 80% of its voting rights. Recently, the Hershey Trust has been selling some of its holdings to diversify its portfolio. Experts say that if the Hershey Trust supports the sale, other companies will also be able to show interest in the acquisition competition and participate. If the acquisition war expands, global powers such as Swiss Nestle, which owns KitKat, could become potential buyers. Hershey holds a KitKat production license in the U.S. Currently, discussions over the acquisition of Mondelliz are in the early stages and it is not clear whether it will lead to an actual transaction, officials said. In response, a spokesperson for Mondelliz declined to comment, and Hershey also replied that he would not comment on market rumors. Hershey Trust did not immediately comment.
Bloomberg predicted that if Mondeliz embraces Hershey, it could raise its global chocolate market share to more than 21%. However, it also pointed out some challenges. First of all, Hershey’s corporate value has increased significantly from the time it was proposed to acquire in 2016, reaching $45 billion. On top of that, as Hershey’s stock structure is a dual structure of A (common stock) and B (voting stock), approval of the Hershey Trust, which owns a large number of B stocks, is essential. Considering the resistance of the U.S. Federal Trade Commission to large transactions, approval by regulators could be another challenge.
U.S. food companies have recently faced declining sales, slowing growth, and weakening global consumption. “Companies are trying to increase sales through innovation and new markets at a time when consumers are paying attention to health while resisting price hikes,” Bloomberg said. “This can lead to business integration.”
With chocolate makers under pressure to raise prices due to the recent surge in Kakao prices, analysts say that if Mondelez and Hershey’s businesses are integrated, their purchasing power in the Kakao market will be strengthened and they will be able to effectively respond to price management. In the case of Mondelez, it is expected that Hirsch’s strong brand position in North America will be used to strengthen access to the U.S. market while creating a path to Europe.
SALLY LEE
US ASIA JOURNAL
