Preview Newsletter

Hershey Media Report

Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Traditional Media Coverage

Hershey kisses off competitor bid from Oreo maker Mondelez
Jun 1, 2016 | Associated Press
By Candice Choi

Hershey on Thursday rejected a takeover offer from Oreo maker Mondelez that would bring some of the world's best known cookies and chocolates under one company.
Trust Holds the Key to Whether a Bid for Hershey Succeeds This Time
Jun 30, 2016 | New York Times
By Leslie Picker, Stephanie Strom and Michael J. de la Merced

For the better part of the last century, there has been one major hurdle whenever Hershey Company was on the verge of a major deal: a charitable trust that controls about 81 percent of the voting power.
Hershey’s Trust Has History of Vetoing Deals
Jun 30, 2016 | The Wall Street Journal
By Annie Gasparro

The roughly $23 billion bid for Hershey Co. by snack maker Mondelez International Inc. won't happen without the approval of the chocolate maker’s largest shareholder.
The Morning Ledger: Hershey Spurns $23 Billion Mondelez Bid Proposal
Jul 1, 2016 | The Wall Street Journal
By Maxwell Murphy

Good morning. Mondelez International Inc. made a roughly $23 billion bidfor Hershey Co. in an effort to create the world’s largest candy maker at a time when both companies’ sales are under pressure. Mondelez, which makes Oreo cookies and Cadbury chocolate bars, recently sent a letter to Hershey proposing a tie-up at $107 a share, half in cash and half in stock. Hershey’s board unanimously rejected the bid Thursday and said it “provided no basis for further discussion.”
CMO Today: Mondelez Wants Hershey, And Maybe Its Brand Too
Jul 1, 2016 | Wall Street Journal
By Mike Shields

HERSHEY KISS: Mondelez International, maker of food products like Oreo and Ritz, made a $23 billion bid for Hershey Co., reports The Wall Street Journal. Besides creating a company that has all the makings of a six-year-old’s ideal dinner (cookies, crackers and chocolate), the potential maneuver could yield an interesting marketing twist
Hershey rejects mega-bid to create the world’s biggest candy company
Jun 30, 2016 | Washington Post
By Drew Harwell

Chocolate giant Hershey has rejected a takeover bid that would have created the world’s largest candymaker, a rare rebuttal in a food industry increasingly marked by mega-deals.
Fate of Megadeal for Hershey Rests With Scandal-Plagued Trust
Jun 30, 2016 | Bloomberg
By Craig Glammona

Holding the key to the sale of America’s second-biggest candy company is a scandal-scarred, $12 billion charity that all but owns Hershey, Pennsylvania.
Hershey Should Give In to Temptation
Jun 30, 2016 | Bloomberg
By Tara Lachapelle and Gillian Tan

Snacks giant Mondelez made a bid for Hershey, the $24 billion maker of the iconic American chocolate bar. Many will tell you that any offer is dead on arrival because Hershey is controlled by a family trust that's long been opposed to selling the company. (Indeed, Hershey put out a statement Thursday afternoon saying it rejected Mondelez's $107-a-share offier.)
Mondelez's move on Hershey sends shivers through cocoa market
Jul 1, 2016 | Reuters
By Luc Cohen

When Olam International agreed to buy rival Archer Daniels Midland Co's cocoa processing business in December 2014, catapulting it into the top echelon of bean buyers, confectioners worried about its outsized power over prices.
Hershey rejects Mondelez buyout, but more offers may be coming
Jul 1, 2016 | Philadelphia Inquirer
By Bob Fernandez

The Hershey Co. candy giant Thursday rejected a takeover bid from Oreo-maker Mondelez International Inc. that would have kept the combined firm's chocolate operations in Hershey, Pa.
No Deal: Hershey Rejects Mondelez’s Takeover Offer
Jul 1, 2016 | Market Realist
By Sue Miller

Mondelez International (MDLZ), maker of Cadbury chocolates and Oreo cookies, sent a proposal to Hershey Company (HSY) for a takeover bid offer. As reported by the Wall Street Journal in the morning on June 30, Mondelez sent a preliminary letter of proposal to Hershey stating a takeover bid of $23 billion—valuing its shares at $107 per share. The Wall Street Journal cited the sources as “people familiar with the matter.” The bid was for 50% cash and 50% stock.

New National Broadcast Coverage Since Last Report

CBS This Morning
Jul 1, 2016 | CBS

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310747?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Morning Express With Robin Meade
Jul 1, 2016 | HLN

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310528?token=acb253e3-985f-42bc-99d0-b5676516d1e3
FBN AM
Jul 1, 2016 | Fox Business

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310260?token=acb253e3-985f-42bc-99d0-b5676516d1e3
FBN AM
Jul 1, 2016 | Fox Business

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310255?token=acb253e3-985f-42bc-99d0-b5676516d1e3
BBC Business Live
Jul 1, 2016 | BBC

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310251?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Squawk Box
Jul 1, 2016 | CNBC

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310911?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Nightly Business Report
Jun 30, 2016 | PBS

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310216?token=acb253e3-985f-42bc-99d0-b5676516d1e3

Full Text of Stories Below

Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Traditional Media Coverage

Hershey kisses off competitor bid from Oreo maker Mondelez

Jun 1, 2016 | Associated Press

By Candice Choi

Hershey on Thursday rejected a takeover offer from Oreo maker Mondelez that would bring some of the world's best known cookies and chocolates under one company.
It confirmed receiving a preliminary offer from Mondelez for a mix of cash and stock totaling $107 for each share of Hershey Co. common stock. That would value the deal at roughly $22.3 billion, according to FactSet.
Hershey said that, following a review, its board determined the offer provided "no basis for further discussion." A deal would be subject to approval by the Hershey Trust, a controlling shareholder.
A spokeswoman for Mondelez, Valerie Moens, declined to comment on whether the company would make a new offer.
The Wall Street Journal, citing sources it did not name, had reported earlier in the day that Mondelez told Hershey it would take the chocolate maker's name and move its global headquarters to Hershey, Pennsylvania. Hershey's shares surged following the report, and closed up nearly 17 percent at $113.49.
Mondelez shares closed up almost 6 percent at $45.51.
In addition to Oreos, Mondelez International Inc., based in Deerfield, Illinois, owns Cadbury chocolates, Trident gum, Nabisco cookies and Ritz crackers.
The acquisition of Hershey would give the combined company 18 percent of the global candy market and make it the industry's largest player, according to Euromonitor International. Mars Inc., which makes M&M's and Snickers, is currently No. 1 with 13.5 percent of the market.
The deal would also give Mondelez a bigger presence in its home candy market. While Mondelez controls Cadbury abroad, Hershey has the licensing rights to the brand in the U.S. Mondelez gets the majority of its revenue from overseas, while Hershey gets most its revenue from North America.
J.P. Morgan analyst Ken Goldman said that at least part of Mondelez's rationale for making the bid was probably "defensive in nature," as the company did not want to be acquired by The Kraft Heinz Co., if Kraft were interested.
Goldman noted that the Hershey Trust's members have recently found themselves in hot water. Earlier this year, the Philadelphia Inquirer reported that the state attorney general sent the trust a letter seeking the resignation of three board members and the reduction of board compensation. The letter said the compensation exceeded the trust's own rules.
Kent Jarrell, a spokesman for the trust board, said in a statement the trust has a long history of working constructively with the attorney general and that it is cooperating with the recent inquiries. The trust was established by Hershey founder Milton Hershey to benefit the Milton Hershey School for disadvantaged children.
A tie-up between Mondelez and Hershey would mark just the latest chapter in a series of deals in the packaged food industry, with companies looking for ways to improve their financial results while up against struggling sales growth in saturated markets such as the U.S.
When Heinz announced plans to buy Kraft last year, for instance, executives cited the cost savings that would be achieved by combining manufacturing and distribution networks. That deal took place just a couple years after Kraft split with Mondelez in 2012.

Return to headline | Return to top
Trust Holds the Key to Whether a Bid for Hershey Succeeds This Time

Jun 30, 2016 | New York Times

By Leslie Picker, Stephanie Strom and Michael J. de la Merced

For the better part of the last century, there has been one major hurdle whenever Hershey Company was on the verge of a major deal: a charitable trust that controls about 81 percent of the voting power.
When Wm. Wrigley Jr. Company wanted to buy the company at a 42 percent premium in 2002, the trust called off the sale at the last minute.
When the trust became unhappy with Hershey’s performance and its deal talks with Cadbury in 2007, it asked for the resignation of six directors.
When Hershey wanted to buy Cadbury in 2010, a rift between the American company and the trust allowed a rival, Kraft Foods, to prevail in the $19 billion acquisition of the British candy maker.
Now, all eyes will be on the Hershey Trust Company again after Mondelez International (which was spun off from Kraft in 2012) made a $23 billion takeover offer for Hershey. On Thursday, Hershey rejected the $107-per-share offer — representing a 10 percent premium — saying in a statement that it “provided no basis for further discussion.”
The question many observers are asking is whether this time will be different if Mondelez comes back with a higher price. The Pennsylvania Attorney General’s Office, which has raised concerns over the trust’s deployment of funds, is seeking an overhaul of its board. If that were to happen, some believe Hershey’s largest shareholder would more apt to sell.
In some ways, the trust is clinging to a storied history. Milton S. Hershey and his wife, Catherine Sweeney, known as Kitty, never had children. So in 1909, they set up a boarding school for needy boys and deeded 486 acres of land to an entity called the Hershey Trust Company, which was created to fund the school.
There are two other charitable entities associated with Hershey, one of which is the nonprofit Milton Hershey School and the other a more plain-vanilla foundation, the M. S. Hershey Foundation, which supports the local museum and park.
In 1918, Mr. Hershey gave all of his Hershey company stock to the trust. At the end of March, the Hershey Trust held 12.7 million common shares of the company.
The Hershey Trust exerts control over the company because of its control of B shares, each one of which has votes equaling 10 shares of common stock. It thus controls roughly 80 percent of the total votes of all classes of the company’s stock. Eric Henry has been chief executive and chief investment officer of the trust since 2012.
Mondelez has pledged to keep jobs and the company’s headquarters in Pennsylvania, and retain the Hershey name. Those details — and concern for the public benefit — may be critical as the largest shareholder, which arguably has never acted like a typical shareholder, mulls over this latest potential tie-up.

Return to headline | Return to top
Hershey’s Trust Has History of Vetoing Deals

Jun 30, 2016 | The Wall Street Journal

By Annie Gasparro

The roughly $23 billion bid for Hershey Co. by snack maker Mondelez International Inc.won't happen without the approval of the chocolate maker’s largest shareholder.
And that key shareholder, Hershey Trust Co., has a long and complicated history of eschewing deals.
A shake-up in the trust’s board membership this year, a need for diversification, and an investigation by the state’s attorney general could change those dynamics. But with 8.4% of the famous company’s common stock and 81% of its voting power, the trust has shown few signs of changing its behavior in recent years.
The trust, set up by chocolate icon Milton Hershey back in 1905, controls an approximately $12 billion endowment for the Milton Hershey School, which runs a school in the town for underprivileged children, and related entities. The trust’s mandate extends beyond maximizing shareholder value.
Back in 2002, the trust blocked an acquisition of Hershey by Wm. Wrigley Jr. even though the deal appeared to accomplish all the goals the trust had set for itself: dilute its investment in Hershey, get a big premium and maintain its relationship to the community of Hershey, Pa. In a last-minute twist, the trust rejected bids from Wrigley as well as a joint bid from Nestlé and what was Cadbury Schweppes at the time.
The community of Hershey, Pa., and alumni of the Milton Hershey School had protested a sale of Hershey, fearing it would hurt the town. Despite the desire to decrease its exposure to the U.S. candy market, the trust ultimately succumbed to the intense public opposition, said a person close to the board at the time.
Shortly after, the trust changed its bylaws making it harder for members to vote for a sale in the future.
The Hershey Trust’s history of thwarting deals reached an apex in 2007. Then-Cadbury CEO Todd Stitzer had approached Hershey CEO at the time, Richard Lenny, in early 2007 about combining the two companies to create a “global confectionery powerhouse.” But when the manager of the trust’s daily operations learned about the potential deal talks, he accused Mr. Lenny of withholding information from the trust. Trust members also later accused the CEO of not detailing the performance woes of the company.
The dust-up resulted in the resignation of Mr. Lenny and eight Hershey directors in whata local paper dubbed “the Sunday night massacre.” By the time the Hershey Trust tried to resume talks with Mr. Stitzer in late 2007, the climate for doing a deal had chilled.
Mondelez ended up acquiring Cadbury in 2010.
The trust now has about two-thirds of its endowment tied up in Hershey stock.
Earlier this year, the trust appointed three new directors, and the Pennsylvania attorney general’s office is seeking the resignation of several longstanding board members.
New members may be in favor of diversifying more by selling the company, which has been struggling in recent years to keep up with the change in consumer taste in the U.S.
About three-quarters of Mondelez’s sales come from outside North America, whereas 88% of Hershey’s sales are domestic. Mondelez also has a much larger snack business, with brands like Oreo cookies and Ritz crackers. Hershey has been bulking up its snack profile with acquisitions of Krave beef jerky and other small brands.
“The trust essentially has the veto vote,” said Jack Skelly, food analyst at Euromonitor International.
But that won’t necessarily stop Mondelez from trying. “I think they’re more than happy to keep driving this. They wouldn’t have started the process of this if they didn’t they had a good chance.”

Return to headline | Return to top
The Morning Ledger: Hershey Spurns $23 Billion Mondelez Bid Proposal

Jul 1, 2016 | The Wall Street Journal

By Maxwell Murphy

Only Relevant Portion Included:
Good morning. Mondelez International Inc. made a roughly $23 billion bidfor Hershey Co. in an effort to create the world’s largest candy maker at a time when both companies’ sales are under pressure. Mondelez, which makes Oreo cookies and Cadbury chocolate bars, recently sent a letter to Hershey proposing a tie-up at $107 a share, half in cash and half in stock. Hershey’s board unanimously rejected the bid Thursday and said it “provided no basis for further discussion.”
Still, Hershey shares surged 17% to $113.49 on news of the offer—first reported by The Wall Street Journal—remaining elevated even after the company rejected the bid, in an indication investors believe Mondelez won’t be discouraged. Mondelez shares gained 6% to $45.51, giving the snack giant a market value of more than $70 billion. A takeover of Hershey, known for its namesake Kisses and chocolate bars, would face obstacles. Any deal 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.

Return to headline | Return to top
CMO Today: Mondelez Wants Hershey, And Maybe Its Brand Too

Jul 1, 2016 | Wall Street Journal

By Mike Shields

Only Relevant Portion Included:
HERSHEY KISS: Mondelez International, maker of food products like Oreo and Ritz,made a $23 billion bid for Hershey Co., reports The Wall Street Journal. Besides creating a company that has all the makings of a six-year-old’s ideal dinner (cookies, crackers and chocolate), the potential maneuver could yield an interesting marketing twist: Mondelez, a company with a name that nobody gets, offered to assume the beloved brand of Hershey (one that practically evokes childhood), CMO Today reports. Hershey rejected the approach, so this may not come to fruition, but if the merger dance resumes, this would be a way for Mondelez to ditch its much-mocked moniker. The name blends two words of Latin origin--“monde” (translation: world) and “delez” (translation: delicious). It seems that some people don’t appreciate how cool Latin is in 2016. “I would put Mondelez up there with some of the worst corporate names,” said Kelly O’Keefe, a marketing professor at Virginia Commonwealth University’s Brandcenter.

Return to headline | Return to top
Hershey rejects mega-bid to create the world’s biggest candy company

Jun 30, 2016 | Washington Post

By Drew Harwell

Chocolate giant Hershey has rejected a takeover bid that would have created the world’s largest candymaker, a rare rebuttal in a food industry increasingly marked by mega-deals.
Mondelez International, the maker of Cadbury chocolates and Oreo cookies, offered nearly $23 billion in cash and stock to buy America’s biggest chocolate conglomerate.
But Hershey, known for its Kisses and Kit Kats, announced Thursday that its board of directors had unanimously rejected the bid, saying they “determined that it provided no basis for further discussion.” Mondelez representatives declined to comment.
The deal would have combined the world’s second-largest candy company, a Kraft Foods spinoff with little business in the United States, with one of the quintessential American brands, whose founding chocolatier’s name adorns theme parks, boarding schools and a small Pennsylvania town calling itself “the sweetest place on earth.”
Hershey stock closed up nearly 17 percent Thursday, even after it rebuffed Mondelez’s offer, to $113.49. Company shares are now worth about 140 times what they first sold for in 1978. Mondelez stock climbed about 6 percent, to $45.51.
[Hershey’s plan to hook Americans onto impulse-buying chocolate again]
“This is a highly ambitious move by Mondelez given the symbolic status of the Hershey brand in the U.S.,” said Jack Skelly, a food analyst with market researcher Euromonitor.
Hershey’s rejection may not mark the end of any such deal, Skelly added. “Mondelez is nothing if not dogged in its approach to such takeovers.”
Food conglomerates have increasingly bought or absorbed rivals in hopes that they can save money by sharing ingredients and streamlining production. Ketchup giant H.J. Heinz and Kraft Foods Group, two of America’s most iconic food brands, merged last year to create Kraft Heinz, one of the world’s biggest food empires.
Mondelez’s largely international business would have also found a close complement in Hershey, which makes 85 percent of its sales in North America. Hershey made a third of the chocolates sold in the United States last year, garnering $6 billion in sales of Almond Joys, Reese’s and other sweets, industry data show. The company also commands a strong business in snacks, a market that is expected to grow 2 percent every year in the United States, reaching $40 billion by 2019, Euromonitor estimated last year.
Although the food business is increasingly dominated by multinational brands, Hershey’s sweets still reveal strong ties to the regions where they first took shape. One of the best-selling markets for Lancaster Caramel Crèmes is Lancaster, Pa., where Milton Hershey launched his first successful candy company and began experimenting with coating caramels in chocolate, according to sales data provided to The Washington Post last year. York Peppermint Patties, the company said, still sell extraordinarily well in the Northeast, home to York, Pa., where the candy was created and first produced.
As a candy entrepreneur, Hershey helped transform chocolates in the United States from a novel, upscale luxury to an affordable, regular treat. He was also an early paragon of consistency in manufacturing: A major innovation involved taking cocoa beans — with differing origins and flavors — and blending them to create snacks with unchanging texture, style and taste.
Mondelez, a considerably newer invention, was created in 2012 when spun off from Kraft Foods’ North American grocery business. But its brands include some of the world’s best-selling snacks, including Chips Ahoy, Oreo and Ritz.
Both companies have pushed to break away from the slow-growing candy business and capture the United States’ burgeoning appetite for healthier snacks. Hershey, best known for its namesake milk chocolate bars, is expanding offerings of fruit-and-nut bars, protein smoothies and sunflower seeds.
The company last year spent more than $200 million to buy Krave, a beef jerky brand, which it has since expanded with flavors such as black cherry barbecue. In August, the company will begin selling Krave protein bars made with ingredients such as dried meat, cranberries and quinoa.
Any major Hershey decision ultimately must be approved by the Hershey Trust, the charitable trust that wields a weighty chunk of shareholder votes and company stock. That trust also controls a $12 billion charity and some of Hershey’s most high-profile side ventures, including a private school for children from low-income families and a Pennsylvania theme park, Hersheypark.
The trust has been resistant to past takeover attempts, including in 2002, when it abandoned a near-finalized offer from rival candy giant Wm. Wrigley Jr. worth $12.5 billion. Wrigley itself was gobbled up in 2008 with a $23 billion offer from Mars, the maker of M&M’s.
The Hershey board said Thursday that Mondelez’s “indication of interest” offered $107 a share for Hershey stock as well other non-monetary offers, which it would not specify. Sources told the Wall Street Journal that Mondelez offered to change its name to Hershey, keep all manufacturing jobs in Pennsylvania and move its global chocolate headquarters to Hershey, Pa.

Return to headline | Return to top
Fate of Megadeal for Hershey Rests With Scandal-Plagued Trust

Jun 30, 2016 | Bloomberg

By Craig Glammona

Holding the key to the sale of America’s second-biggest candy company is a scandal-scarred, $12 billion charity that all but owns Hershey, Pennsylvania.
Hershey Trust Co. controls about 80 percent of Hershey Co., guides the 107-year-old Milton Hershey School, and oversees an amusement park and resort in the town of about 14,000.
Its 10 trustees have been averse to deals, scuttling efforts to separate them from their candy-coated source of cash. The Hershey Co. board rejected Mondelez International Inc.’s $23 billion bid Thursday to put together the biggest candy maker in the world by buying the ailing chocolate company.
What surprised some observers was that Hershey offered no rationale for rebuffing Mondelez, saying only that it saw nothing in the offering that warranted further discussion.
It could be a negotiating ploy, said Chris Growe of Stifel Financial Corp.
“We believe Mondelez will raise its offer to entice the Hershey Trust to engage in negotiations and eventually sell the business,” Growe said Thursday. If that fails, perhaps Hershey will get a bid from Nestle SA, he said. Nestle was about to buy the company in 2002 before the Hershey Trust killed the deal. Mondelez declined to comment on the deal. So did Kent Jarrell, a Hershey Trust spokesman.
Four years after establishing the Hershey Trust, chocolate baron Milton Hershey opened the boarding school for low-income students and designated the trust as its administrator. The trust also runs the Hershey Entertainment & Resorts Company, which operates a minor-league hockey team, entertainment venues and Hersheypark. Along with the factory and corporate offices of the chocolate company, they dominate the landscape in Hershey, about 100 miles west of Philadelphia.
U.S. consumers are cutting down on sugar and the candy company is suffering. Its name has been bandied about as a potential takeover target in recent months as the food industry consolidates. But any rumors come tinged with a touch of skepticism, mostly because of the Hershey Trust. Without its approval, a sale has no chance. Attorney General
Then there’s the little detail that the Pennsylvania attorney general has the right to review a deal to acquire the candy maker. That’s because the trust is legally obligated to continue financing the Milton Hershey School, and since the trust is supported by profits from the chocolate company, the state can try to stop a sale if it determines that school funding is threatened.
The trust has been the subject of allegations in recent years of lavish spending by board members. The state attorney general recently sought the resignation of three board members and asked the trust to reduce board compensation, the Philadelphia Inquirerreported.
Trust executive John Estey, a one-time aide to Pennsylvania Governor Edward Rendell, was fired in April after pleading guilty to wire fraud associated with campaign contributions.
With all the controversy at the trust, Mondelez emerged with a bid to take over Hershey at $107 a share.
“I think Mondelez appreciates that the trust’s board has been weakened, and given how protective of Hershey’s interests the trust has been, now is the time, if ever, to swoop in,” said Asit Sharma, an analyst at the Motley Fool. “We can expect an adjusted offer in the near future, which will be more difficult for the board to reject unanimously as shareholders clearly support the idea of a merger.”

Return to headline | Return to top
Hershey Should Give In to Temptation

Jun 30, 2016 | Bloomberg

By Tara Lachapelle and Gillian Tan

Snacks giant Mondelez made a bid for Hershey, the $24 billion maker of the iconic American chocolate bar. Many will tell you that any offer is dead on arrival because Hershey is controlled by a family trust that's long been opposed to selling the company. (Indeed, Hershey put out a statement Thursday afternoon saying it rejected Mondelez's $107-a-share offier.)
But here's why it shouldn't spurn a suitor out of hand:
Sugar Crash
Like many big food manufacturers, Hershey's growth has slowed and its stock has been a bore.
For nearly three years, Hershey's stock price has been flat. Candy and chocolate aren't exactly fast-growing areas of the food market, there's not a whole lot of room to innovate and millennials are driving a consumer shift toward healthier snacks. Short sellers are even beginning to take a bite out of the company:
Not So Sweet
The number of investors betting against Hershey is at its highest since 2010.
Hershey's valuation may be looking increasingly too rich to justify -- unless of course a deal does take place. That's not to say the company should run with the first offer Mondelez makes. After all, Mondelez is backed by big activist shareholders Bill Ackman and Nelson Peltz, and one would think they'd keep M&A negotiations from resulting in too frothy a price.
But the food industry is consolidating at a rapid pace, and acquirers are proving willing to pay higher valuations than in the past given the growth challenges they're up against. That means now's the time to hear out suitors and push for the best takeover price possible -- not summarily dismiss the idea of a deal. It could be good for Hershey shareholders.THEY'RE HUNGRY
Hershey should hold a formal auction process and see who else comes out of the woodwork...perhaps Nestle, Kellogg -- or even Warren Buffett (it's no secret that the billionaire's sweet tooth has motivated some of his past acquisitions), either with or without an assist from 3G Capital.
Nestle could pay well north of the $107 a share that Mondelez offered. In fact, if it stumped up an all-cash offer of $124 a share for Hershey, representing a decent 30 percent premium to Wednesday's closing price, the purchase would still immediately boost earnings even without accounting for synergies, according to data compiled by Bloomberg. A deal at those terms would actually be even more accretive to Kellogg, boosting its earnings by almost 20 percent, according to Bloomberg data.
Notably, Mondelez's offer -- a mix of cash and stock -- represents a mere 10 percent premium, which is well below this year's global average of 32 percent. While maintaining the same ratio of cash and stock, it can afford to pay roughly $116 a share while having the deal remain accretive before any synergies, Bloomberg data show.
Hershey leaped to almost $118 a share, but investors curbed their enthusiasm after the company's statement. The fact that it's still hovering at roughly $112 a share indicates that traders think Hershey may still be in play and can fetch a higher price than what Mondelez offered.OFF THE MARK
Poor Bill Ackman, though. He just can't catch a break. In March, Pershing Square trimmed its stake in Mondelez after the holding became outsized compared to the plummeting values of his investments in companies like Valeant. Any deal with Hershey seriously lessens the likelihood that the Oreo cookie maker will become a takeover target itself -- the very idea behind Ackman's thinking when he bet on the company last summer. This probably isn't the deal dessert he ordered.

Return to headline | Return to top
Mondelez's move on Hershey sends shivers through cocoa market

Jul 1, 2016 | Reuters

By Luc Cohen

When Olam International agreed to buy rival Archer Daniels Midland Co's cocoa processing business in December 2014, catapulting it into the top echelon of bean buyers, confectioners worried about its outsized power over prices.
Now, Mondelez International Inc's audacious bid on Thursday for Hershey Co, to create by far the world's largest cocoa buyer, could hand the bargaining chips in the volatile niche market back to the candy makers. With more buying power, candy makers could demand lower prices from traders already operating on thin margins.
Hershey's board of directors unanimously rejected Mondelez's $23 billion takeover bid on Thursday.
Even so, the combined company would cushion Mondelez from wild swings in prices of key ingredients. Soaring cocoa, dairy and nut prices forced some in recent years to raise prices, but the sticker shock for sweet-toothed shoppers hurt sales.
But the bid also raised the specter of consolidation among chocolate makers, which could create larger buyers of commodities including cocoa and sugar, worrying middlemen who have already seen their margins squeezed.
The additional pricing power of the new entity would be "concerning," a veteran cocoa buyer said.
Mondelez is already the world's largest cocoa consumer, and after a tie-up with Hershey it would consume 650,000 tonnes per year, 50 percent more than the No. 2 consumer, Nestle SA , according to the Cocoa Barometer publication by nonprofit industry watchdog VOICE Network.
Global cocoa demand totals around 4 million tonnes annually.
"You create a huge giant as far as cocoa consumption is concerned," said Antonie Fountain, VOICE managing director.
The most immediate questions raised by the potential deal concern the companies' relationships with Swiss processor Barry Callebaut AG, which became the world's largest manufacturer of chocolate and cocoa products after a 2013 purchase of Petra Foods' cocoa business.
In 2007, Barry Callebaut reached a deal to supply Hershey with chocolate through 2022. Three years later, it agreed to supply Kraft Foods - which spun off Mondelez in 2012 - with the majority of its cocoa products and industrial chocolate globally. It remains a top supplier after the spinoff, sources said.
The fact that Barry Callebaut supplies both companies reduces its risk of being squeezed out, but a combined company would likely look for alternatives and exert some leverage on prices, four industry experts each with decades of experience said.
"If it were me, I would look to diversify away from Barry," said one of the sources. They spoke only on condition of anonymity because they are not authorized to comment to the press.
Representatives of Barry Callebaut and Cargill Inc both declined to comment. Cocoa processor Blommer did not immediately respond to a request for comment.
Growing purchasing power in the downstream sector would squeeze already-tight margins among processors, one trade source said. Grinders and processors have consolidated in response to tight competition amid stagnant demand.
"This makes them one more powerful buyer in an already consolidated industry," said a sugar trader with a global firm.

Return to headline | Return to top
Hershey rejects Mondelez buyout, but more offers may be coming

Jul 1, 2016 | Philadelphia Inquirer

By Bob Fernandez

The Hershey Co. candy giant Thursday rejected a takeover bid from Oreo-maker Mondelez International Inc. that would have kept the combined firm's chocolate operations in Hershey, Pa.
But even as the Hershey board was unanimously rejecting the offer, its stock was rising. Hershey shares closed up $16.35 on Thursday - or almost 17 percent - to $113.49. Shares retreated slightly after hours but stayed in that range as analysts speculated that the move on the iconic chocolate company may yet attract more offers.
Mondelez offered $107 a share and a total of $23 billion for Hershey, which has faced slowing growth and remains mostly a U.S. firm.
Investors believe that Mondelez, which makes Cadbury chocolate in Europe and is more international in scope, could bid up to $120 a share or more.
Keith Denninger, an event-driven strategist with the institutional research firm Olivetree Financial in Stamford, Conn., said Mondelez may be seeking a deal because the trust that controls Hershey faces internal turmoil and could be vulnerable to a buyout.
Mondelez also has come under pressure from activist investor William Ackman, who wants the company to increase revenues or sell out. Mondelez, based in Deerfield, Ill., declined comment.
The $12.3 billion Hershey Trust controls about 80 percent of the voting control of the Hershey Co. as the fiduciary for the 2,000-student Hershey School for impoverished children and orphans, the richest private school in the nation.
The Pennsylvania Office of Attorney General is seeking the removal of three trust board members who have served more than 10 years, including chairwoman Velma Redmond and former chairman Robert Cavanaugh, by July 31.
Cavanaugh also holds a seat on the candy company board, as does former Pennsylvania Gov. Tom Ridge.
Mondelez has reportedly said it would change its name to Hershey and run its global chocolate operations from the central Pennsylvania town, according to a report by CNBC. News of a possible offer was first reported by the Wall Street Journal.
Hershey, whose confectionary brands include Reese's, Jolly Rancher, Good & Plenty, Rolo, and Twizzlers, faces its own challenges, including a cutback in sugar consumption by Americans and a relatively small international business as other candy giants have globalized operations.
Seeking to diversify its sugar-based products, Hershey acquired the company that makes and markets Krave jerky in March 2015.
Hershey had sales of $7.4 billion and profits of $512 million in 2015. Stock dividends on Hershey shares help finance the educational programs at the Hershey School.
In 2015, Mondelez reported sales of $29.6 billion and profits of $7.3 billion.
"From a geographic perspective, the move makes sense," Jack Skelly, an analyst with Euromonitor, told Bloomberg News. "Mondelez has achieved its position as the second-largest confectionary manufacturer in the world without a sizable presence in the United States."
But a Mondelez deal for Hershey seems far from certain due to state politics.
In 2002, then-Attorney General D. Michael Fisher and the Dauphin County Orphans Court halted the sale of the Hershey Co. to Wm. Wrigley Jr. Co. for $89 a share when the community and unionized workers protested the deal in the streets.
The company may not rekindle that support, as over the last decade it has closed its big chocolate plant in downtown Hershey and moved those manufacturing operations to Mexico.
The company has retained a manufacturing complex with two factories in Hershey, one that makes milk chocolate and a second that makes Reese's Peanut Butter Cups and Kit Kats.

Return to headline | Return to top
No Deal: Hershey Rejects Mondelez’s Takeover Offer

Jul 1, 2016 | Market Realist

By Sue Miller

Mondelez made a $23 billion takeover bid
Mondelez International (MDLZ), maker of Cadbury chocolates and Oreo cookies, sent a proposal to Hershey Company (HSY) for a takeover bid offer. As reported by the Wall Street Journal in the morning on June 30, Mondelez sent a preliminary letter of proposal to Hershey stating a takeover bid of $23 billion—valuing its shares at $107 per share. The Wall Street Journal cited the sources as “people familiar with the matter.” The bid was for 50% cash and 50% stock.
According to sources cited by the Wall Street Journal, the proposal by Mondelez also stated that the company offered to protect jobs after the merger, locate its global chocolate headquarters in Hershey, Pennsylvania, and rename the company “Hershey.” This deal would have only passed through with the approval of the Hershey Trust. The Hershey Trust holds 8.4% of the famous company’s common stock and 81% of its voting power.
Hershey rejected Mondelez’s offer
In the afternoon on June 30, Hershey announced in a report that its board of directors unanimously rejected Mondelez’s takeover offer. It provided “no basis for further discussion” between both of the companies. The news benefited both companies’ market value. Mondelez’s market value rose to $70 billion and Hershey’s rose to $24.22 billion as of June 30. Before this news, Mondelez had a market value of $69 billion and Hershey had a market value of $21 billion.
Together, Hersey and Mondelez account for 4.8% of the Consumer Staples Select Sector SPDR ETF (XLP).
Lately, mergers, acquisitions, and spin-offs are a popular trend in the packaged food industry. The most remarkable merger was Kraft Foods Group and H.J. Heinz Holding Corporation in 2015. The merger formed The Kraft Heinz Company (KHC). 3G Capital, a Brazilian private equity firm, completed the merger deal along with Warren Buffett’s Berkshire Hathaway.
Another deal announced recently is the spin-off of ConAgra Foods (CAG) into two public companies in the fall of 2016. The consumer brands business will operate under ConAgra Brands. The frozen potato business will operate under Lamb Weston.
Hershey stock reached new highs
After the news of the takeover offer, Hershey (HSY) stock reached new highs. After the takeover bid news, reported by the Wall Street Journal, Hershey stock rose 21% to $117.7 in intraday trading. Later in the day, Hershey rejected Mondelez’s (MDLZ) offer. The stock closed at $113.49 after rising ~17% even after the offer was rejected. Mondelez’s stock also rose 6% and closed at $45.51. Its market value is $70 billion as of June 30.
As of June 30, Hershey was trading 22% above its 100-day moving average, 21% above its 50-day moving average, and 17% above its 20-day moving average. Mondelez was trading 7%, 4%, and 3% above its 100-day, 50-day, and 20-day moving averages, respectively.Stock performances
As of June 30, Hershey stock has gained ~29% so far in 2016 and 22% in June. Mondelez has gained 4% so far in 2016 and 2% in June. Hershey outperformed the market by 15%—represented by the S&P 500 Index (SPY). The market also rose 14% on June 30. Hershey and Mondelez’s stock returned 99% and 94% annually in the last five years, respectively.
Other peers in the industry such as Nestle S.A. (NSRGY) has returned 5% and Kellogg (K) has returned 14% so far in 2016. Nestle and Kellogg closed trade at $77.31 and $81.65, respectively, on June 30.Analysts’ ratings and recommendations
Currently, analysts have assigned Mondelez with 62% “buy” ratings and 37% “hold” ratings with a target price of $48.81. This indicates an upside potential of 7% compared to the current trading price. Hershey has 78% “buy” ratings, 17% “hold” ratings, and 5% “sell” ratings with a target price of 91.23. As of June 30, Hershey already beat analysts’ estimate by 24%.
Mondelez was formed in October 2012 when it separated from Kraft Foods Group. Kraft Foods Group’s North America business was renamed “Mondelez International.” The company holds a portfolio of nine billion-dollar brands. It’s one of the largest snack food companies in the world. Its primary product categories include cookies, chocolate, candy, beverages, cheese, and grocery. The company’s portfolio consists of 58 brands. Its power brands include Cadbury’s chocolates, Oreo cookies, Trident gum, Jacobs coffee, and Tang powdered beverages.
The Hershey Company is the largest producer of quality chocolate in North America. It’s a global leader in chocolate and non-chocolate confectionery. It operates under 80 brands in 70 countries worldwide.

Return to headline | Return to top

New National Broadcast Coverage Since Last Report

CBS This Morning

Jul 1, 2016 | CBS

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310747?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: r>>> "wall street journal reports on hershey rejecting a huge takeover bid. the snack giant mondelez made a $238 offer building for hersheys and would have created the largest candy maker. hersheys said they provided no basis for further discussion. >> oh, fudge! >> those hershey kisses are really good.

Return to headline | Return to top
Morning Express With Robin Meade

Jul 1, 2016 | HLN

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310528?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: hershey's says it is not so, but this was really big news in the food world. you know, this is a huge bid that we're talking about here. hershey board unanimously rejected it though. it would be nearly impossible for mondelez to try a hostile takeover. hershey was built almost more like a fortress so a lot of its inside power is with the miltonhershey trust and not with stockholders but that could have put together several billion dollar brands that maybe you don't know the name mondelez

Return to headline | Return to top
FBN AM

Jul 1, 2016 | Fox Business

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310260?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: rejected a takeover offer from oreomaker mondelez, from exit cash stock totaling $107 a share. the wall street journal told sources mondelez would take the hershey name, the global headquarters to hershey, pennsylvania, all-time record highs and stock finished

Return to headline | Return to top
FBN AM

Jul 1, 2016 | Fox Business

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310255?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: hersheysays it has rejected a takeover offer from the oreomaker mondelez. it totals $107 a share valueing the deal at $22 billion. the wall street journal quoted sources who said mondelez said it would take the hershey name and move the global headquarters from new jersey to hershey, pennsylvania. shares

Return to headline | Return to top
BBC Business Live

Jul 1, 2016 | BBC

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310251?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: us chocolate giant hershey has rejected a $23 billion takeover offer from rival mondelez, the owner of brands including cadburys and oreos. the deal would have created the world's top confectionery company, overtaking the current leader mars. but hershey's controlling shareholder - a charitable trust created by the founder

Return to headline | Return to top
Squawk Box

Jul 1, 2016 | CNBC

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310911?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: hershey, jim, is like what is an american brand like hershey worth? i can't -- you know, you've been on that kick for a while, if you think about that. >> i love hershey. i remember when they first decided to be more than chocolate and started buying other brands and then moved their factories to less expensive places so that the gross margins went up. it's been a winner and it's worth

Return to headline | Return to top
Nightly Business Report

Jun 30, 2016 | PBS

View Clip Here: http://app.criticalmention.com/app/#clip/view/23310216?token=acb253e3-985f-42bc-99d0-b5676516d1e3
Rough Transcript: >> speaking of hunger, hershey rejects a takeover offer from the maker of oreos. mondelez proposed a tie-up that would bring together popular candy brands to create the world's largest confectioner. shares of both companies soared on the initial report of the bid and they stayed higher after hershey's rejection. david faber tells us what might happen next. >> reporter: enough to make you want to have some hersheys kisses, a day filled with ups and downs. mondelez making a $107 share cash and stock bid for hershey and being soundly rejected later in the day. the hershey board saying it doesn't even see the reason for further discussions given at least that price. this following months of discussions as we reported between the two companies culminating in that offer made last week to hershey's directors by mondelez. what now? well, mondelez thought or at least hoped it would get to the board of directors, perhaps even get their approval and then move on to the all-important hershey trust which controls 80% of the voting shares of hershey. in fact, they made allowances for just that, hoping that by saying we would call the company hershey. we would headquarter our global chocolates business hershey, pennsylvania and not eliminate manufacturing jobs they would get the approval of the trust and so far they have gotten the approval of nothing. the board soundly rejecting that offer and we will see where the mondelez chooses to come back with another offer at this

Return to headline | Return to top

Full Text of Stories Below

Add recipients

Suggested