On Thursday, Hershey said it rejected a takeover bid of $23 billion by Mondelez that was seeking to expand the limited footprint of Mondelez in the U.S. while creating the largest confectioner in the world.
Hershey’s snub just underscores the big challenges facing CEO of Mondelez Irene Rosenfeld in wooing the controlling shareholder of Hershey, the Hershey Trust, a charity of $12 billion that was created by the founder of the company more than 100 years ago.
The maker of Reese’s Peanut Butter Cups and Hershey’s Kisses saw shares of its stock trade above the bid of Mondelez that was $107 a share in both cash and stock, which indicated investors were expecting another offer.
A unification of two of the top five world candy makers would add to a strong U.S. business to the global footprint of Mondelez.
Earlier, one source said Mondelez sought to give assurances to officials at Hershey it would keep the name along with preserving jobs.
Mondelez does not see much antitrust risk since there is limited overlap geographically of the companies’ businesses, said one source close to the matter.
Hershey’s board of directors voted unanimously to reject the bid by Mondelez and determined it did not provide any basis for more discussion between the companies, said a statement released by Hershey.
Shares of Hershey ended Thursday trading up over 16.7%, while shares of Mondelez were up 5.9%.
Mondelez, which makes Oreo cookies, is the second biggest global confectionary business, while Hershey is No. 5. A merger of the two would put them at No. 1 with 18% of the overall market, according to an online research firm known as Euromonitor International.
The combined entity would pass Mars Inc, which currently holds close to 13.3% of the overall global market.
The fusion of Mondelez and Hershey’s would hand control to Mondelez for the production as well as distribution of the Cadbury chocolates brand in the U.S., which currently is held by Hershey.
The deal would give Mondelez as well the production and the distribution in the U.S. of Kit Kat, one of the world’s most popular brands of chocolate bar, which sources in the industry said, would be a huge boost for Mondelez.
Worldwide, Kit Kat is manufactured by Nestle, but Hershey holds the right to the candy bar in the U.S. playing royalties to Nestle for sales.
Mondelez’s bid for Hershey might pressure Nestle to mull over its own bid for the chocolate company.