Hershey Plunges After Mondelez Pulls Offer To Buy Company

Tyler Durden's picture

Three months after Mondelez shocked the world with the latest proposed mega-merger, when it offered $23 billion to acquire Pennsylvania's iconic Hershey, in a bid to make the world's biggest candy maker combining the candy industry’s second- and fifth-largest players by revenue, moments ago, the snack giant, which makes Oreo cookies and Cadbury chocolate bares, announced it was no longer pursuing the combination.

From the just filed press release:

Mondel?z International, Inc. today announced it has ended discussions with The Hershey Company regarding a possible combination of the two companies.

 

"As the world's leading snacking company, we remain focused on successfully executing our strategy to deliver both sustainable top-line growth and significant margin expansion and are well-positioned to continue to deliver value to our shareholders," said Chairman and CEO Irene Rosenfeld. "Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands. Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement.  While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term."

As the WSJ, which first broke the news of the proposed merger, wrote at the time, Mondelez, which had engaged in aggressive mergers in the recent past, was certain to face various obstacles: among other, it would require the approval of the Hershey Trust, which holds 8.4% of its common stock and 81% of its voting power and has opposed a sale in the past. In preparing its bid, which was disclosed in a private letter last week, Mondelez took steps to win over the trust. The Deerfield, Ill., company pledged to protect jobs, locate the merged company’s global chocolate headquarters in Hershey, Pa., and rename it Hershey, said a person familiar with the matter.

The Hershey Trust, established by the 122-year-old company’s late founder, Milton Hershey, is the biggest potential roadblock. The trust’s primary beneficiary is a school for underprivileged children in Hershey’s hometown.

 

Mr. Hershey was considered as much a philanthropist as an entrepreneur. As he built the chocolate company, he raised a town as well, erecting a bank, a department store, churches, golf courses, a zoo and a trolley system. Then, in 1909, he and his wife, Catherine, founded a school for orphan boys, now called the Milton Hershey School. Today the lavishly appointed private school serves disadvantaged children of both sexes.

The Pennsylvania attorney general was also investigating the trust’s board for alleged overpayment of directors and conflicts of interest, and the trust has said it is working with the attorney general’s office on the probe. This year, several of the directors have resigned, which could change the board’s attitude toward a possible sale. Indeed, a person familiar with the matter said the trust, which now includes some directors with Wall Street backgrounds, may now be more open to a deal.

Among the other potential hurdles for Mondelez: its bid could flush out other parties who might covet Hershey. Nestlé SA is one possibility. The Swiss food giant, which has a big chocolate business, licenses its KitKat brand to Hershey in the U.S. But Nestlé could face bigger antitrust issues in the U.S. if it were to try to buy Hershey. Nestle has the right to reclaim control of KitKat at no cost if someone else buys Hershey. That could reduce Hershey’s value to Mondelez by $3 billion, according to a person familiar with the matter.

It also wasn't clear how any any deal would be received in the town of Hershey, where streetlights along Chocolate Avenue are topped with giant Hershey kisses.

Then there was the purchase multiple, which valued the company at roughly a 30x P/E multiple.

Or perhaps it was simply "market conditions" - after all, the S&P failed to close at a new all time high.

Whatever the reason for the termination, this particular merger has now been pulled, much to the chagrin of merger arbs who are long the stock, as HSY was down12% after the news...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NoDebt's picture

"Hershey squirts lower after hours"

The headline practically writes itself, Tyler.

More Ammo's picture

Just exactly what is the Cadbury Bunny going "Bare" that is covered in chocolate?

The Merovingian's picture

Hershey's ... it melts in your mouth but not your shorts!

Emergency Ward's picture

"Hershey's Kisses not for Mondy.  Melt."

LadiesLoveCoolJames's picture

Tyler could do an expose on the Hershey Trust that would blow all your minds and drive every ZHer absolutely crazy. It's the purest form of crony/gubmint private business.

roddy6667's picture

The stock took it right up the Hershey Highway.

Panic Mode's picture

Must be a sugar rush decision.

Squid Viscous's picture

right up the old hershey highway for longs

ParkAveFlasher's picture

Hershey Park has the best kettle corn in this dimension.  Not sure how that relates to the stock price.

Squid Viscous's picture

jew mondelez ceo would have made them jack up the price, so you WIN

Handful of Dust's picture

A very bitter sweet decision.

 

However, I read somewhere even worser news ---  that Oreos are one of the most cancer-provoking foods on the market...which is really bad news since I used to love them.

SomethingSomethingDarkSide's picture

No one is buying this fattening crap anymore - the products will sit on shelves and outlast the company's financial well-being.

cowdiddly's picture

Well there is a certain Ukrainian chocolate company that Im sure you could buy from some digusting fat fuck for cheap, cheap for that "global brand marketshare".

Ferraro Cockroche of sumtpin.........

TuPhat's picture

Mondelez is not a US icon. It produces Oreo cookies in Mexico and who knows where the cadbury stuff is made. Cadbury was not a US company before they were bought out. I no longer eat oreos, I don't need to get salmonella.

Handful of Dust's picture

Cadbury has a very higgh level of toxic stuffs in it...I think they said cadmium. My doc said only to eat organic chocolate.

Grimbert's picture

Cadbury's was a proud company: https://en.wikipedia.org/wiki/John_Cadbury beloved by all English people. chocolate buttons were the first solid food for most of us.

We have been betrayed by Kraft fucking with the creme egg recipe, we don't eat them any more, and even dairy milk isn't quite the same as it was. 

We console ourselves with the fact that Cadbury's isn't nearly as awful as Hersheys, which tastes of baby sick. And I do know...

 

However Nestlé has not fucked with Kitkats, polos, etc, and Mars is American anyway and still tastes nice.

MrSteve's picture

They cut half the union jobs in the Oreo plant in Chicago. Snopes has this report:

So while it's true that Nabisco's parent company announced the elimination of some jobs at a Chicago plant, the number of jobs affected was 600 (not 1,200 or 2,000), and the facility was not closed. The company concurrently invested the expansion of manufacturing plants in three states, and Oreos remain in production in the U.S. at facilities in New Jersey, Oregon, and Virginia.

Last updated:   28 September 2015

Spungo's picture

This is definitely a pump and dump scheme. As far as I'm aware, the Hershey charter does not allow the company to ever be sold to anyone. The person making the bid to buy the company never intended to actually buy the company. They knew it would never happen. 

ParkAveFlasher's picture

It worked in 1929.  It works today.

Seasmoke's picture

Was just in Hershey a few weeks ago. Kids loved it. However, I wasn't too impressed. Everything looked old and stale to me. And the prices sucked beyond belief. I did enjoy the Hershey Museum. As best I could tell Milton Hershey was a good man. 

SmilinJoeFizzion's picture

Carlos Danger has some free time now- maybe he'll buy the company

Twee Surgeon's picture

I like Chocolate now and then and Hershey's was at least passable as Choco, for a while, The fat lady got me some Hershey's Chocolate as she knows I like some in the fridge for a nibble, now and then, I'm not a Chocolate snob, easy to please peasant boy, really.

Put a nibble of a Hershey's Chocolate bar in your mouth and it is gone in about 5 seconds, so I look at the ingredients.

Reading from the package here, the key word we are looking at is Soy, SOY-Soy, Capiche?

Milk Chocolate under FDA the substance once known as milk chocolate can now be sold under this ingredient label, (Cane Sugar; Milk; chocolate ; cocoa butter; milk fat; lecithin(Soy), and (natural Flavor?), I likes me a bit of the old natural flavor, how about you? you like that old FDA approved natural flavor ? It tastes like (Teen-Spirit, the bumper of a 72 Cadillac,) who knows what the old "natural flavor ingredient might be ? MMMM! Natural flavor.

I challenge Everyone here to find a jar of Mayonnaise in their local supermarket that does not contain Soy, I bet you can not do it, also look at the ingredients of ANY processed food package and look to see if it contains Soy,9/1 odds it will, Test my theory before you call me misinformed.

Why Soy? Get a bit of the old Soy and mix it up with your Fluoride, Yay! that is some yummy shit,

Have a little Blue Dwarf Wheat to inflame your entire body and you are on your way to Industrial Medicine complex billing land.

Do your own research, do not believe some dick on the Internets,

http://paleoleap.com/dangers-soy/    Soy.

https://www.youtube.com/watch?v=UbBURnqYVzw   Blue Dwarf wheat mutated with Sodium Azide in the 1960's, Sodium Azide is the explosive propellant used in the air bags in your car/ truck air bags too, so yeah, Chocolate is nice, do your home work before sticking supermarket shit in your (and your families,mouth) they are signing you up as a Commodity for the Medical biz. Read the label and do not eat the poison. Get a Chicken coop, the girls are lovely and will give as much as they take, get a goat, get out, do something. Educate yourself and then your neighbors, the shit hits the fan soon, be aware. The Government is not your friend, if they were, US air force jets would be shooting down the imaginary, conspiracy theorist chem trail sprayers, not flying the jets on your dime. Stop being a lazy fuck and investigate.

brada1013567's picture

Oh Warren, you could make chocolate coke.

Bopper09's picture

Don't worry Hersh.  Just borrow money at 0% and buy back shit tons of your own stocks.  Easy save.

Grimbert's picture

Hershey's chocolate tastes like baby sick. Kraft has fucked with the recipe for Cadbury's. Creme eggs now taste like shit. At least Nestlé has kept Rowntree chocolate tasting how it should.

 

yellowsub's picture

It's funny how the same candies sold outside the US tastes much better...   

 

robertocarlos's picture

That's reason enough for me to leave NA. There is this nice soft candy fron Germany made with yugurt. As soon as the Canadian dairy faggots found out the candy is no longer available.

JustPastPeacefield's picture

Your Hershey Kisses production would have been moved to Mexico or China in a heartbeat. Same old story. Maybe Trump is actually having some impact before he even gets to the Oval Office. Even if he doesn't win, the issue is front and center, and won't go away. We've been fucked up the hershey highway by these fucking billion dollar deals, but the tide might be turning. 

wide angle tree's picture

I rarely buy the big brands any more. They raised the prices too much and shrunk the products.

It's obvious sales are suffering because the shelf space for the expensive junk is shrinking. $3 for 10 oz of potato chips. I'll pass.