It was a wild day in the chocolate business.
Hershey has turned down a takeover offer from Mondelez International, the Deerfield-based maker of Oreos and other snack foods, the chocolate company said Thursday. A merger between the two companies would have formed the world’s largest candy manufacturer.
It’s unknown at this point whether Mondelez will redouble its efforts and up its offer. The initial offer price was for about $107 per share, which amounts to about $26 billion, according to some analysts. Reports of the offer shook up the food and candy industry for half the day and sent stocks of both companies upward. To some analysts, the merger of Mondelez and Hershey, the second- and fifth-largest candy companies in the world, respectively, made perfect sense. Others were surprised to see Mondelez emerging as a buyer, rather than a seller.
Before Hershey announced that its board had voted against the offer, some analysts warned that there could be challenges.
Erin Lash, a Morningstar analyst who covers both companies, said such an offer could potentially benefit both companies, considering Hershey is the leading chocolate company in the U.S., whereas Mondelez’s confectionary sales are primarily in other countries. But she noted that such a merger would have a significant hurdle to clear in gaining approval from the Milton Hershey School Trust, which holds more than 80 percent of the voting power in the company.
“When Hershey attempted to sell itself in 2002, school alumni as well as the Pennsylvania attorney general vigorously opposed a deal, and we fail to see how this time would be different,” Lash said in her analyst notes Thursday.
Under the offer, Mondelez would have moved its “global chocolate headquarters” to Hershey, Pa., and renamed the company Hershey, according to The Wall Street Journal story that first broke the news Thursday morning, citing anonymous sources. Mondelez also vowed to protect Hershey jobs, according to the report.
It was unclear whether Mondelez would have moved some or all of its headquarters from Deerfield, or if it would have established a different headquarters in Hershey that’s focused on confectionary production. Currently, Mondelez does not have headquarters based on food categories but instead has regional headquarters in different parts of the world. Mondelez does business in 165 countries.
The company’s global headquarters is in Deerfield, where earlier this year, Mondelez reduced the space by half — to 50,000 square feet from about 100,000 square feet — in one of many efforts to eliminate costs across the company. About 500 people work there.
“We would hate to lose Mondelez, but at this point, I can’t begin to comment on speculation,” said Deerfield Mayor Harriet Rosenthal.
Mondelez came into existence when Kraft Foods split into two publicly traded companies in 2012. The spun-off North American grocery business, Kraft Foods Group, later merged with Heinz to become Kraft Heinz. Prior to that split, Kraft acquired Cadbury, which is now in the Mondelez portfolio and represents the bulk of the company’s global candy business.
Like other food manufacturing companies, such as Kraft Heinz and ConAgra Foods, Mondelez is under tremendous pressure from shareholders to cut costs and improve profit margins as more consumers eschew processed food for healthier options.
“To me, it’s an opportunity to put two slow-growth companies together and the synergies are mostly through cost savings. I think both companies have top-line (revenue) problems,” said Bob Goldin, vice chairman for the Chicago-based market research firm Technomic.
More Top Picks Office
Hershey has been considered to be a takeover target by some analysts because of its position as the leading company in the U.S. chocolate market and its attractive profit margins.
“The news that Hershey is the subject of a bid from Mondelez has certainly captured the imagination of those in the food industry. Yet rumors of an acquisition of Hershey have persisted for some time, suggesting the part public, part Trust-owned business has been seriously considering selling,” said Euromonitor International analyst Jack Skelly in an email before the board vote.
baiduhai’s Samantha Bomkamp contributed.
Twitter @GregTrotterTrib