In a bid to become the world’s largest candy maker, Mondelez International is believed to have offered to purchase The Hershey Company (NYSE:HSY) ‘s at $107 a share, half cash and half in stock, according to Bloomberg News citing an unnamed source.
Mondelez move for Hershey is not a surprise
Investors had expected that the move was coming for some time with the Wall Street Journal reporting earlier this month that Mondelez, which split from Kraft in 2012, sent Hershey’s a letter expressing their interest in acquiring the famed confectioner. The market values Hershey’s at roughly $25 billion.
Hershey’s picked up about 21% yesterday when the stock rose as high as $117.79 for its largest intraday gain in nearly a decade-and-a half.
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While neither company has chosen to speak of the takeover yet publicly, it’s assumed to be a nearly done deal and should go through without much of a hitch sometime this year.
Hershey’s is presently trading at $111.54 (12:22PM EDT) up $14.44 or nearly 15% after opening at $97.55
The pairing makes a tremendous amount of sense. Mondelez International Inc., the Oreo maker and bane of Donald Trump, is largely focused on overseas markets while nearly 90% of Hershey’s revenue came from sales in North America last year.
“From a geographic perspective, the move makes sense,” said Jack Skelly, an analyst at Euromonitor. “Mondelez has achieved its position as the second-largest confectionery manufacturer in the world without any sizable presence in the U.S.”
The Hershey Company name not going anywhere
Hershey’s name is worth quite a bit and it’s believed that Mondelez would like the new company to bear the Hershey name. Additionally, it’s thought that Mondelez as pledged to not layoff Hershey workers and that the combined headquarters will be moved to Hershey’s existing offices.
The cutbacks in candy consumption in the United States may be the reason that the Hershey family trust is now interested in a buyout. That trust controls about 80% of the voting rights of the company.
“They control the company,” said Bloomberg Intelligence analyst Ken Shea. “If it’s a friendly deal, presumably they’ll have the trust on board.”
In the past, it has been the family trust that holds a bit shy of 9% of the stock but significant voting rights that has seen buyouts ultimately fail.
However, it appears that Mondelez is willing to make nearly any concession to make it happen this time.