Hershey gains on report Mondelez explores a possible takeover

Investing.com -- Hershey Co. shares surged more than 14% in early Monday trading following a report from Bloomberg that Mondelez International Inc (NASDAQ:MDLZ ). is exploring an acquisition of the iconic chocolate maker.

The potential deal would create a combined food giant with nearly $50 billion in annual sales.

According to Bloomberg, Mondelez, the maker of Oreos and Ritz crackers, has made a preliminary approach about the potential combination, with deliberations said to be in the early stages.

However, Bloomberg states that its sources told them there’s no certainty that discussions will lead to a deal.

This isn’t Mondelez’s first interest in Hershey; the company abandoned a $23 billion takeover attempt in 2016 after Hershey rejected its bid, said Bloomberg.

A takeover of Hershey would likely require approval from the Hershey Trust Co., which holds 80% of the company’s voting power. However, Bloomberg noted that deliberations remain in early stages, and there’s no certainty a deal will materialize.

The report also notes that the trust has slowly been selling some of its Hershey Co (NYSE:HSY ). shares in an effort to diversify its holdings.

The potential acquisition comes as the packaged food sector faces challenges, including slowing growth and higher ingredient costs.

Hershey, known for Reese’s and Kisses brands, has been hit by elevated cocoa and sugar prices and recently cut its sales and earnings outlook amid inflationary pressures.

Bloomberg added that Mondelez has shown interest in expanding its chocolate and snack businesses, with analysts citing its financial capacity for mergers.

A potential deal would surpass Mars Inc.’s recent $36 billion acquisition of Kellanova, making it one of the year’s largest.

Source: Investing.com