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Hershey Media Report 7/5/16
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Expecting a Sweet Deal for Hershey? You May be Disappointed — Dealpolitik
Jul 5, 2016 | The Wall Street Journal
By Ronald Barusch
Hershey Co. shareholders salivating over the prospect of a rich cash-and-stock deal with Mondelez International Inc. may go hungry. -
Hershey Considers More Than Money as Mondelez Makes Offer
Jul 5, 2016 | Bloomberg
By Alex Sherman
A company whose name sounds like a disease, according to investor Nelson Peltz, is trying to buy Hershey. Mondelez offered about $23 billion to acquire Hershey in an unsolicited bid that was unanimously rejected by the famed chocolate maker. Will Mondelez bump up its bid? Even if it does, will the Hershey Trust, which controls the voting shares, agree to sell the company? Bloomberg reporter Craig Giammona takes a deep dive into a potential Mondelez-Hershey tie up with Deal of the Week host Alex Sherman. -
Reuters visits Hershey, finds residents oppose takeover of their hometown company
Jul 5, 2016 | Lancaster Online
By Tim Stuhldreher
The Hershey Co. has a one-of-a-kind relationship with its local community, a mutually beneficial symbiosis that has made Hershey one of the most prosperous towns in central Pennsylvania. -
Analysts suggest Hershey's 'no' may not dissuade Mondelez
Jul 5, 2016 | Central Penn Business Journal
By Roger DuPuis
The Hershey Co. may have fended off a takeover proposal from snack food giant Mondelez International, but analysts suggest we may not have heard the last from those looking to buy the chocolate maker. -
Mondelez and Hershey Would not 'Taste Great Together'
Jul 5, 2016 | The Steet
By Chris Laudani
Last week Mondelez (MDLZ) launched a bid of $107 a share for chocolate maker Hershey (HSY). Hersey rejected the offer, but the stock traded higher anyway, as investors are anticipating a sweeter deal to come. Hershey shares rose almost 16% on the news. I believe HSY investors should take profits off the bounce. This deal would be a disaster. -
Will the Hershey legacy endure?
Jul 5, 2016 | Toronto Star
By Jennifer Wells
In photographs a smiling Milton Snavely Hershey was a vision of kindliness. Always mustachioed, often favoring a straw boater, his waistcoat strained at the buttons, Hershey exuded paternalism and, as the world quickly learned, a flare for outsized philanthropy. -
Heard on the Street: Overheard
Jul 5, 2016 | Wall Street Journal
The sweetest place on earth isn't the biggest place on earth. That fact had to be going through the minds of executives at Mondelez International when their company made a quickly rebuffed offer Thursday to acquire Hershey Foods and to move its headquarters to Hershey's hometown, too. -
'Sweetest' town clings to Hershey, adding to takeover hurdles
Jul 5, 2016 | Reuters
By Koh Gui Qing
The town of Hershey, Pennsylvania, calls itself the "sweetest place on earth." -
Expect higher bids for Hershey Co. from Mondelez
Jul 4, 2016 | Financial Post (Canada)
By Jonathan Ratner
A compelling case for Mondelez International Inc.'s US$23 billion takeover offer for Hershey Co. can be made for both sides. A compelling case for Mondelez International Inc.'s US$23 billion takeover offer for Hershey Co. can be made for both sides. -
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Jul 5, 2016 | Bloomberg
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Jul 5, 2016 | CNBC
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Expecting a Sweet Deal for Hershey? You May be Disappointed — Dealpolitik
Jul 5, 2016 | The Wall Street Journal
By Ronald Barusch
Hershey Co. shareholders salivating over the prospect of a rich cash-and-stock deal with Mondelez International Inc. may go hungry.
All three players that have influence in Hershey’s unique governance system have legal and institutional tools that could make a deal less likely than in the case of a more conventional unsolicited proposal. To wit: Hershey directors have no duty to sell the company or to follow the wishes of public shareholders; the trust that controls the company through a super-voting class of shares isn’t likely to want to give up that grip; and the Pennsylvania Attorney General who oversees the trust — and has successfully gone to court to stop a sale in past — isn’t likely to force one now, in my view.
Let’s start with the directors who declared Thursday, the same day the proposal leaked, that it “provided no basis for further discussion.” The press release didn’t even mention the adequacy of the $107-per-share price. That’s a good indication that the board is on course for a so-called “just say no” defense, which is generally permitted in Delaware — where Hershey is incorporated. And if the trust, which has veto power over any deal, has told the directors it isn’t a seller, the board need go no further.
The Journal reports that Mondelez is pledging to locate the merged company’s global chocolate headquarters in Hershey’s hometown, protect jobs and even change its name to Hershey. But a skeptical board could discount such promises. Once a deal closes, who will be around to enforce the spirit or even the letter of them? And the headquarters and name are only part of the unique symbiotic relationship among the company, the local community, the trust and the famous school it supports.
Plus there is no small irony to this promise. When Mondelez predecessor Kraft Foods Inc. acquired Cadbury PLC (now Mondelez’s chocolate operation in the U.K.), it made a promise not to close an English chocolate factory. Once it gained control, it backtracked, saying after gaining more information it determined it was not feasible to keep the factory open. It was a controversial move that ultimately resulted in changes to U.K. takeover rules.Some who would like to see a deal may take comfort from Hershey’s statement, given it didn’t contain an explicit rejection by the trust. But the trust has several representatives on the Hershey board and the release makes clear the rejection was unanimous. Besides, why would the trust stick its neck out unnecessarily when the legal support for the board rejection is so clear? Although there has been discussion in the past about the trust diversifying and at least one false start over the years involving a possible sale, it’s hard to believe that the trust would be an enthusiastic seller. At the moment it controls one of the leading American corporate icons, which is integral to the Hershey community. Managing a trust with a minority position in Mondelez and other investments likely doesn’t carry the same panache. And, once they start down a sale path, it could become harder to resist a competing bid from a company like Nestle SA, which might not make similar commitments to the community.
That leaves the Pennsylvania Attorney General, which has a role in supervising the trust. That relationship has been rocky, including a recent effort to get the trust to toss three long-standing board members at the school it supports. But a new AG will be elected this November and I just don’t think it would be a great campaign slogan to say: “I am the one who forced a sale of Pennsylvania’s legendary Hershey.” And it would be even harder to explain if Switzerland’s Nestle bought the company and controlled it offshore.
That doesn’t mean there is no price at which the trust would be willing to sell. It does, after all, need to look after the school, its sole beneficiary. But absent a fat price, don’t expect the decision-makers to think a deal looks as sweet as public shareholders might.
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Hershey Considers More Than Money as Mondelez Makes Offer
Jul 5, 2016 | Bloomberg
By Alex Sherman
A company whose name sounds like a disease, according to investor Nelson Peltz, is trying to buy Hershey. Mondelez offered about $23 billion to acquire Hershey in an unsolicited bid that was unanimously rejected by the famed chocolate maker. Will Mondelez bump up its bid? Even if it does, will the Hershey Trust, which controls the voting shares, agree to sell the company? Bloomberg reporter Craig Giammona takes a deep dive into a potential Mondelez-Hershey tie up with Deal of the Week host Alex Sherman.
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Reuters visits Hershey, finds residents oppose takeover of their hometown company
Jul 5, 2016 | Lancaster Online
By Tim Stuhldreher
The Hershey Co. has a one-of-a-kind relationship with its local community, a mutually beneficial symbiosis that has made Hershey one of the most prosperous towns in central Pennsylvania.
And what do you know? Local residents really don't want that to change.
"On paper, a sale to Mondelez could benefit Hershey," Reuters reported in an article posted Tuesday morning, referring to the unsolicited $23 billion takeover bid by Mondelez International Inc. that the Hershey Co.'s board unanimously rejected last week.
But people in the chocolate maker's home town "have prospered from its presence and tend to be fierce defenders of its independence," the publication said.
A merger with Mondelez would have created the world's largest candy company. Mondelez reportedly had promised to name the entity "Hershey" and move its headquarters to the Dauphin County town. But local residents were skeptical, and Reuters noted other large corporations have reneged on similar promises.
"I don't think they should sell the company," one woman told Reuters' reporter. "Hershey is Hershey. It should always be Milton Hershey. He did good for the community."
Frequently, company decision-makers can ignore a deal's local impact. That's not the case for Hershey, however, because the Hershey Trust owns the majority of the voting stock.
"Pennsylvania law requires any charitable trust to consider, when selling an asset, the 'special relationship of the asset and its economic impact as a principal business enterprise on the community” and the 'special value' of its ties to the community," Reuters said.
Local residents have mobilized against potential sales of Hershey before, Reuters noted, and the opportunity may arise again: Hershey's stock price stayed high after the deal fell through, indicating investors expect another offer to be made.
Don't worry, Mondelez International told the residents of Hershey, regarding its plans to take over the Hershey Co.: This won't hurt a bit.
But they worried, reports Reuters. The town and the chocolate company have nurtured each other over many decades, and many residents fear they would be shortchanged if Hershey were to be sold.
"Hershey is Hershey. It should always be Milton Hershey. He did good for the community," Reuters quotes a 76-year-old woman, identified as "G.C.," giving tours at Hershey's Chocolate World.
Hershey's board unanimously rejected Mondelez International's unsolicited $23 billion takeover bid on Thursday. The merger would have created the world's largest candy company.
Hershey's high share price suggests investors expect Mondelez' takeover offer won't be the last, Reuters said.
Residents point to houses built by Milton Hershey for his factory workers," Reuters and extol the "Hershey legacy", where a successful business looks after the people, the way Hershey did at the height of the Great Depression in the 1930s by embarking on a construction spree in town to create jobs.
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Analysts suggest Hershey's 'no' may not dissuade Mondelez
Jul 5, 2016 | Central Penn Business Journal
By Roger DuPuis
The Hershey Co. may have fended off a takeover proposal from snack food giant Mondelez International, but analysts suggest we may not have heard the last from those looking to buy the chocolate maker.
"We don’t think that Mondelez is going to walk away at this juncture," Erin Lash, an analyst with Chicago-based investment research firm Morningstar Inc., said Tuesday.
And that is despite a terse rejection last week from Hershey’s board to an acquisition proposal from Illinois-based Mondelez. The maker of Oreo Cookies reportedly was also willing to move its headquarters to Dauphin County and retain the Hershey name.
The Hershey board was unanimous in its rejection of the $23 billion deal, and "determined that (the proposal) provided no basis for further discussion between Mondelez and the company." That was all Hershey had to say publicly, and Mondelez has repeatedly declined to comment beyond confirming the existence of a proposal.
But Lash and other analysts have suggested that the benefits of a possible merger could prove too sweet for both companies to let last week’s rejection be the final word.
As Lash explained, Mondelez has been all but shut out from the U.S. chocolate market.
Mondelez owns Cadbury — in a deal engineered by former parent Kraft Foods, from which Mondelez was split off in 2012. But Hershey has held the rights to Cadbury’s U.S. brands since 1988, Lash noted. A merger with Hershey would allow Mondelez to enter the American market in a big way.
At the same time, "a deal could facilitate Hershey’s expansion outside its home turf — where it has struggled — with the aid of Mondelez’s vast geographic network," Lash wrote in an online commentary on the prospects for a future deal.
What's next
Lash is not alone in predicting future overtures.
• Crain’s Chicago Business, whose coverage area includes Mondelez, called Mondelez Chairman CEO Irene Rosenfeld a "consummate dealmaker"who brokered the Kraft spin-off. Rosenfeld doesn’t back down from a fight, the paper said.
• Reuters suggested that Hershey’s "once impenetrable defenses" have been weakened by investigations into the Hershey Trust Co., the company’s main stockholder, as well as controversy surrounding Pennsylvania Attorney General Kathleen Kane. Under state law, the AG would have a say in any change of ownership.
As Reuters also pointed out, state law requires any charitable trust looking to sell an asset to consider the "special relationship of the asset and its economic impact as a principal business enterprise on the community" and the "special value" of its ties to the community.
• A merger between Mondelez and Hershey would bring together the world’s second- and fifth-largest candy makers, putting the resulting company in the top spot, ahead of Mars. As several analysts note, such a deal also would have to pass muster with federal antitrust regulators. CNBC reported, however, that an unnamed source told the network Mondelez does not see a major issue there since the companies’ markets have limited geographic overlap.
• Note that in recent weeks, speculation of an approach from Nestle was circulating in investment circles, though the two companies declined to comment and no formal pitch ever emerged.
Jack Russo, a senior analyst with Edward Jones, said Hershey is "a prized asset in packaged food," but hedged on how a merger might play out.
"Hard to say how this will go since the Hershey Trust owns 80 percent of the shares and their sole purpose is to fund a school for underprivileged school children," Russo told CPBJ.
Lash acknowledged that a deal "is far from certain," but "we doubt Mondelez will throw in the towel at this point."
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Mondelez and Hershey Would not 'Taste Great Together'
Jul 5, 2016 | The Steet
By Chris Laudani
Last week Mondelez (MDLZ) launched a bid of $107 a share for chocolate makerHershey (HSY). Hersey rejected the offer, but the stock traded higher anyway, as investors are anticipating a sweeter deal to come. Hershey shares rose almost 16% on the news. I believe HSY investors should take profits off the bounce. This deal would be a disaster.
Mondelez made the nonbinding bid to acquire the chocolate maker, and was quietly rebuffed by Hershey. The snack maker is desperately trying to fill a hole in its strategy, a strategy that I believe needs serious reworking. Currently, North America represents just 27% of MDLZ sales, whereas North America accounts for 90% of Hershey sales.
With 85% of its revenues from snacks, Mondelez is having a hard time growing, as it has been hit with a double whammy -- a global economic slowdown and a snacking slowdown. Emerging markets GDP has fallen from 5.2% in 2012 to 4% in 2015. Likewise, according to A.C. Nielsen, the global snack category has slowed dramatically. Global snacks grew 5.9% in 2012 and just 4.1% in 2015. Meanwhile, currencies, like the strong U.S. dollar, and volatile input commodities, like cocoa, are playing havoc with margins.
At the analysts meeting back in February, MDLZ gave guidance of organic revenue growth of 2% and double-digit earnings growth for 2016, but it is unlikely the company will be able to make those forecasts.
Most analysts forecast a 2016 sales decline of 11% for MDLZ, reflecting an accounting change in its Venezuelan operations, unfavorable currency exchange rates and a drop in shipment volumes.
In fact, falling revenue is not new to MDLZ, having fallen 16% in 2014 and 9.8% in 2015. While revenue is expected to decline, gross profit is forecast to increase 3% as a result of cost cutting and a lower tax rate.
I have been skeptical of this story since the company was spun out of Kraft (KHC).
I think Hershey shareholders should take profits on the 16% pop in the stock. It is unlikely this $23 billion deal will get done. First, Hershey is controlled by the Hershey Trust Company, which has 81% of the company's voting power and 8.4% of the common stock. The trust was set up in 1905 by Milton Hershey, and one of its founding missions was to make decisions based on the impact to the Milton Hershey School (also set up by Hershey, in 1909) and the community of Hershey, Pennsylvania.
The Trust unanimously voted against the Mondelez offer last week. I think the Trust takes its responsibility to the children of the school and the community very seriously, and any deal would be very difficult to achieve.
Second, as a result of a 2002 state law, any deal would need the approval of the Pennsylvania attorney general. Third, any deal could face legal challenges in Pennsylvania Orphans' Court, which overseas the school and could hold up any deal.
Some investors argue it would be prudent for the Trust to diversify its portfolio and stop holding just one stock. But, shares of Hershey have outperformed the S&P 500 for 30 years. They've done a lot better than MDLZ holders.
To me, this takeover bid is a desperate attempt by MDLZ management to cover up its lousy top-line performance. Mondelez is probably running out of expenses to cut, so adding another company to the fold allows management to push its cost cutting and EPS growth agenda for another few years. Run up debt and force all the free cash flow into stock buybacks. It sounds good, but doesn't usually work too well.
Of course, hedge funds love this deal because they all fell for the Mondelez story to begin with. But they would have been better off buying an Index fund. The S&P 500 has outperformed MDLZ by 30 points since it went public.
I believe a deal between Mondelez and Hershey would leave a bad taste in your mouth. It is not a sweet deal.
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Will the Hershey legacy endure?
Jul 5, 2016 | Toronto Star
By Jennifer Wells
In photographs a smiling Milton Snavely Hershey was a vision of kindliness. Always mustachioed, often favoring a straw boater, his waistcoat strained at the buttons, Hershey exuded paternalism and, as the world quickly learned, a flare for outsized philanthropy.
He was given to nostrums: “One is only happy in proportion as he makes others feel happy.” And his care and worry about impoverished youth appeared to be exemplary for a businessman in his day, echoing the impassioned Joe Atkinson of the Toronto Star. The two were not far apart in age and saw up close the punishments of poverty and disadvantage.
How much of this is hagiography? It seems narratively fitting — pushing the bounds of fiction, almost — that Hershey was a candy man and not, say, an oil man like Rockefeller. He built an eponymous town in Pennsylvania designed to have “no poverty, no nuisances and no evil,” erected a hotel at the corner of Chocolate and Cocoa, established a trust to control his corporate interests and a school as the clearest sign of his beneficence.
The guiding principles of the Hershey Industrial School were clear: “Give as many boys as possible real homes, real comforts, education, and training, so they become useful happy citizens” and “Eliminate any notion of institutional life and charity.” In 1933 Hershey amended the school’s charter to broaden the range of eligible students to “poor healthy white male orphans” between the ages of four and 14. (The school is now co-ed and extends through Grade 12.)
In the years since, The Hershey Co. has stood stalwart against some of the forces defining contemporary capitalism while growing its global presence through such acquisitions as B.C.-based Brookside Foods (dark chocolate enrobed cranberries etc.) and Krave Pure Foods (those ubiquitous transit ads for black cherry barbecue pork jerky) and making a bumpy expansion into China through candy maker Shanghai Golden Monkey.
Throughout, the company has maintained a singular reputation for twinning social purpose with profits, a statement that might sting the residents of Smiths Falls who watched sadly as Hershey closed up shop in the town long known as the chocolate capital of Ontario.
The question for Hershey now is whether the spurned takeover intentions of snack giant Mondelez International — a cash and stock offer of $107 (U.S.) a share and other “non-monetary considerations” — will prove a tipping point, despite Hershey’s terse statement that the offer “provided no basis for further discussion.”
What the Mondelez offer has done is highlight how Milton Hershey’s best laid plans became entangled in bureaucracy and high-level politics. The politics part surprises. Three years ago, Pennsylvania Attorney General Kathleen Kane announced an agreement with the Milton Hershey School and the Hershey Trust putting an end to double-dipping directors who sat both on the boards of the for-profit chocolate company and/or Hershey Entertainment and Resorts as well as the school and the trust.
An independent consulting firm was brought in to set new, lower, compensation levels and the trust was directed to provide notice to the attorney general’s office of real estate transactions of more than $250,000, a nod to a still contentious golf course acquisition some years earlier.
In May of this year, the Philadelphia Inquirer reported on the “continuing chaos” at the charity, with the AG seeking the resignation of three of the school’s board members and probing “apparent violations” of the 2013 agreement.
It’s a mess. The resignation of a Hershey Trust executive over the pocketing of funds in an unrelated FBI probe has added some side-show colour. As has the pending trial of Attorney General Kathleen Kane over leaked emails in a grand jury probe, again unrelated to Hershey.
Through his will, Milton Hershey determined that the control of the school, and the capital stock in the chocolate company, would rest with Hershey Trust Co. That remains true today, with the trust controlling more than 80 per cent of the candy maker through Class B shares.
Here’s where it gets peculiar. In 2002 the trust was closing in on a sale of the chocolate company to Wm. Wrigley Jr. Co. The town of Hershey, as you would expect, was up in arms. What was unexpected was the intervention of the attorney general of the day, arguing that such a sale would do “irreparable harm” to the town and determining that the protection of property was the state’s right.
In September, 2002, the trust, caving to pressure, announced that it was no longer looking for a buyer.
The town of Hershey today is on tenterhooks. Is a sale off the table? Will Mondelez make a second pass? The larger question is whether the legacy of Milton Snavely Hershey can endure as is, or whether his own careful ownership creation has undone what was meant to be benevolence at its best.
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Heard on the Street: Overheard
Jul 5, 2016 | Wall Street Journal
The sweetest place on earth isn't the biggest place on earth. That fact had to be going through the minds of executives at Mondelez International when their company made a quickly rebuffed offer Thursday to acquire Hershey Foods and to move its headquarters to Hershey's hometown, too.
Usually, a larger company from a bigger city -- Mondelez is headquartered in East Hanover, N.J., just 25 miles from Midtown Manhattan -- wouldn't do that. It clearly was a concession, and not a particularly effective one, to sway the trust that controls the chocolate company.
Hershey, Pa., with fewer than 15,000 people in the 2010 Census, really is a small town. Two hours' drive from Philadelphia, the nation's fifth-largest city, it has no airport or even interstate highways. On the positive side, there is a popular amusement park nearby, Hersheypark, and median home prices are less than 40% of those in East Hanover. Sweet.
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'Sweetest' town clings to Hershey, adding to takeover hurdles
Jul 5, 2016 | Reuters
By Koh Gui Qing
The town of Hershey, Pennsylvania, calls itself the "sweetest place on earth."
But if chocolate giant Hershey Co. considers any new acquisition offer in the coming weeks, it could face bitter opposition from some in its namesake town, where residents have prospered from its presence and tend to be fierce defenders of its independence.
The impact of such views goes beyond sentimental in the wake of Mondelez International Inc's (MDLZ.O) $23 billion bid to buy the company, which Hershey said on June 30 it had rejected. The town of Hershey, where the company's staunchest loyalists are referred to as "Hershey-ites", has real influence over corporate decisions.
The Hershey Trust, a $12 billion school charity and the company's controlling shareholder, has become increasingly involved in the local community over the decades, and has appeared to listen to its concerns in the past.
Pennsylvania's attorney general, who supervises the trust and can ask a court to block any deal, holds an elected office and is sensitive to local concerns, though the current office holder is not planning to seek reelection.
Pennsylvania law requires any charitable trust to consider, when selling an asset, the “special relationship of the asset and its economic impact as a principal business enterprise on the community” and the “special value” of its ties to the community.
Since the company was founded by Milton Hershey 122 years ago, residents here have fought many plans that would have changed Hershey Co. and, in turn, a community built around one of the world's most famous confectioners.
Although the Hershey Trust rejected the bid by the maker of Oreos cookies, a spike in Hershey's share price above the bid of $107 per share has indicated investors expect a new offer.
Many in the rural town of around 14,000 people voiced apprehension to Reuters about a sale, despite apparent reassurances from Mondelez.
The food and beverage multinational has offered to keep Hershey's name, move its headquarters to Hershey, and preserve jobs, according to people familiar with the matter who declined to be identified because Mondelez has not disclosed details of the bid. Most residents declined to give their full names, citing local sensitivities around discussing the firm, which employs 4,800 people here.
"I don't think they should sell the company," said a 76-year-old woman who gave her name as G.C., as she guided visitors through Hershey's Chocolate World, a sprawling candy store stocked with giant chocolate bars.
"Hershey is Hershey. It should always be Milton Hershey. He did good for the community," said the woman, who has worked at Chocolate World for eight years.
"IT'S ALWAYS BEEN HERSHEY"
A 3.5-hour train ride from New York, Hershey stretches out across verdant fields between delectably named streets such as Chocolate Avenue and Cocoa Avenue. Between well tended lawns and street lamps shaped like the popular Hershey's Kisses Chocolate, Hershey is dotted with landmarks from a theater to a cemetery that are tied to the confectioner.
Residents point to houses built by Milton Hershey for his factory workers and extol the "Hershey legacy", where a successful business looks after the people, the way Hershey did at the height of the Great Depression in the 1930s by embarking on a construction spree in town to create jobs.
House prices and income levels in Hershey are substantially higher compared to neighboring towns in Pennsylvania, according to government data.
Today, the heart of the "Hershey legacy" is arguably found in the Milton Hershey School, a private boarding school for around 2,000 students from low-income families. Their education and living expenses are paid for by the Hershey Trust, which is funded by the Trust's stake in the chocolate maker.
"Everyone who worked for Mr Hershey always had a job," said Ernie, a 69-year-old Hershey worker who declined to give his last name. "It's always been Hershey."
Asked about the town's role in the company, Hershey Co. said: "We are proud of the company's rich heritage and the Hershey community." Spokespeople at Mondelez were not immediately available for a comment.
The town's devotion to its roots has led to confrontations in the past. Back in 2002 when Wm. Wrigley Jr., renowned for its chewing gum, attempted to buy Hershey for $12.5 billion, irate local residents signed petitions and staged rallies to stop plans to sell the company.
The then attorney general sought to block the deal, prompting the Trust to call off the sale at the last minute.
When some residents complained about the planned demolition of parts of an old Hershey factory in 2012, the company went ahead anyway.
"People like things to stay the way they are," said a 63-year-old resident who has lived in Hershey since 1978.
To be sure, not all Hershey residents are attached to the status quo. Some younger residents voiced indifference to the future of the candy maker, saying practical business considerations should take precedence.
On paper, a sale to Mondelez could benefit Hershey.
Hershey has a strong U.S. presence while Mondelez has a global network. A marriage of the two would create the world's largest confectionary company with an estimated 18 percent of the market share, said market research firm Euromonitor International Ltd.
While Mondelez has vowed to keep Hershey's name and preserve jobs, some said such promises would ring empty with loyal "Hershey-ites."
U.S. food giant Kraft, now known as Kraft Heinz Co (KHC.O), drew controversy in 2010 after it shut a factory in southwest England following its takeover of Cadbury, now owned by Mondelez, reneging on an earlier promise to keep the factory open.
"Would I like it to be sold? No," said the 63-year-old resident.
"There is the legacy and the history of Mr Hershey, and what becomes of the Trust? I don't know what will become of the school and the Trust."
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Expect higher bids for Hershey Co. from Mondelez
Jul 4, 2016 | Financial Post (Canada)
By Jonathan Ratner
A compelling case for Mondelez International Inc.'s US$23 billion takeover offer for Hershey Co. can be made for both sides.
While Hershey's board rejected the US$107 per share cash and stock offer, investors shouldn't expect Mondelez, or other potential suitors, to give up easily.
Of course, Hershey not only has a history of turning away suitors, but the company has also rid itself of parts of its leadership team that were interested in selling, including the CEO and board members in 2007.
But times have changed, as Hershey isn't as strong as it once was.
"Sales have slowed - mostly because of category weakness and a lack of meaningful innovation - and global opportunities have not yet panned out as expected," said Ken Goldman, an analyst at J.P. Morgan.
Another factor that may being weighing on Hershey is the controversy surrounding several members of the Hershey Trust, which controls more than 80 per cent of the company's voting stock.
Pennsylvania's Attorney General wants three board members to resign from the Hershey School, the US$12 billion charity's sole beneficiary, amid a two-year investigation into rising board compensation and a golf course purchase, as well as charges being filed in early May against a top trust official.
Three members of the trust also serve as members of the Hershey Co. board.
Since the trust was apparently willing to hear Mondelez out, as discussions were conducted over several months, it no longer looks like a deal is impossible.
Goldman is leaning toward what he calls the 'this makes sense and probably will happen' camp.
One possible concession Mondelez could offer is moving its global chocolate headquarters to Hershey, Pennsylvania - something that would benefit both the town and state.
It could also offer to change its name to Hershey. After all, activist investor Nelson Peltz, who owns a significant stake in Mondelez along with Bill Ackman, once said he hated the name as it sounds "like a disease."
It's a combination of "monde," which is derived from world, and "delez," another word for delicious. So while the company faces slowing growth in emerging markets, it may be seeking expand Hershey's footprint as it now gets 85 per cent of its sales in the U.S.
Goldman pointed out that Mondelez could potential provide an overseas distribution and marketing channel for some of Hershey's more iconic brands, something that hasn't been done with any meaningful success so far.
A merger could also see the reuniting of Cadbury U.S. (controlled by Hershey) with Cadbury global (owned by Mondelez). Combining the two companies would mean overtaking Mars as the largest confectioner globally with 21 per cent of the market, and combined sales of US$37 billion.
"Hershey may be seeing the writing on the wall about retailers' view of chocolate," the analyst said, highlighting CVS's recent decision to reduce candy's front-of-store shelf space by 25 per cent, as well as Target's tests with moving candy away from the checkout aisles.
Goldman thinks the US$107 per share bid was "merely a starting point," and that Mondelez could pay as much as US$134.
"In fairness to Mondelez, we do not think the company would be willing to go to $134, because the idea is to create a deal that is accretive after synergies, not one that is neutral to EPS," he said. "But the message remains the same, that we expect further bids at higher price points."
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Jul 5, 2016 | Bloomberg
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Jul 5, 2016 | CNBC
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