Hershey Media Report 7/6/16

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

Trade Coverage

1. Mondelez: Dreaming the Impossible Dream With Hershey Bid

   Jul 6, 2016 | Barron's

   By Ben Levisohn
   
   
   Susquehanna’s Pablo
   Zuanic and Svetozar
   Stefanovic explain why Mondelez’s (MDLZ) bid for Hershey (HSY) will almost certainly fail
2. A Mondelez Takeover Could Damage Hershey Forever

   Jul 6, 2016 | Seeking Alpha

   Last week, The Hershey Co. (NYSE:HSY) received a surprise takeover bid, propelling the stock price of the already optimally-priced company further through the roof. When I saw the takeover bid was from Mondelez International (NASDAQ:MDLZ), my heart dropped.
3. Have a break

   Jul 6, 2016 | Breakingviews

   By Kevin Allison
   
   
   The humble Kit Kat bar could give the finger to most of Hershey’s suitors. The U.S. candy company, which rejected a $23 billion bid from Cadbury owner Mondelez last week, licenses the British snack from Nestlé, which could take the American rights back if Hershey is sold. The arrangement gives the Swiss food group leverage to play kingmaker.

Broadcast Coverage

4. Squawk on the Street

   Jul 6, 2016 | CNBC

   View Clip Here: http://app.criticalmention.com/app/#clip/view/23379435?token=3aacb50b-124c-4785-b1c5-9b4decea3cc4

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

Trade Coverage

1. Mondelez: Dreaming the Impossible Dream With Hershey Bid

   Jul 6, 2016 | Barron's

   By Ben Levisohn

   Susquehanna’s Pablo
   Zuanic and Svetozar
   Stefanovic explain why Mondelez’s (MDLZ) bid for Hershey (HSY) will almost certainly fail:

   Todd Stitzer tried (twice), WM Wrigley also tried, and nowMondelez CEO Irene Rosenfeld is trying. But we think the outcome will be the same: no sale of HSY. True, the Mondelez approach is well-timed given the slew of challenges faced by the Hershey Trust (owner of a 34% economic interest in Hershey, but holder of 81.5% of the voting stock); moreover, diversification would probably help the Trust’s ultimate mission of funding and operating the Milton Hershey School (where the endowment per student ratio is $6M compared with $1.7M at Harvard). But our read of politics and regulations in Pennsylvania, makes us doubt a sale will ultimately take place. There are too many (mostly political) variables that would need to come together…

   We
   would
   not read
   too
   much
   into
   the
   Kraft
   links
   in
   the
   management
   team. COO Michele Buck worked for several years at Kraft (but has been with Hershey since 2005), as did Terence O’Day (Chief Supply Chain Officer), and probably others brought in by Rick Lenny (who was Hershey CEO from March 2001 to October 2007; he was a top executive at Nabisco before that). Also, Mary Kay Haben (long career at Kraft) was the most recent addition to the Hershey Board (2013). But we would not read much into this (i.e., we do not see them as more or less welcoming to a Mondelez bid; they all have different duties now).

   Shares of Mondelez have declined 0.4% to $44.73 at 10:36 a.m. today, while Hershey has fallen 1.2% to $109.21, and Kraft Heinz (KHC) is off 0.5% at $88.33.

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2. A Mondelez Takeover Could Damage Hershey Forever

   Jul 6, 2016 | Seeking Alpha

   Last week, The Hershey Co. (NYSE:HSY) received a surprise takeover bid, propelling the stock price of the already optimally-priced company further through the roof. When I saw the takeover bid was from Mondelez International (NASDAQ:MDLZ), my heart dropped.

   Full disclosure: I do not hold The Hershey Co. directly, only via exposure through mutual funds and ETFs. I have been looking to initiate a position in The Hershey Co. for 2 years now, but the price has always been more than I've wanted to pay. I have been waiting patiently for years for a correction and thus far, it has not materialized. With the threat of a Hershey-Mondelez deal out there, I now wouldn't touch the stock with a ten-foot pole.

   While the details of the deal were not disclosed, I was immediately upset by the news. While current investors may be overcome with immediate short-term bliss as dollar signs flash before their eyes at the opportunity of a buyout, I can't help but believe the deal would be a disaster for the long-term prospect of the company and its investors. I believe it is in the best interest of The Hershey Co.'s long-term investors for the company to stay as far away from Mondelez International as possible and continue to operate independently for many reasons.

   Reason #1: Irene Rosenfeld

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3. Have a break

   Jul 6, 2016 | Breakingviews

   By Kevin Allison

   The humble Kit Kat bar could give the finger to most of Hershey’s suitors. The U.S. candy company, which rejected a $23 billion bid from Cadbury owner Mondelez last week, licenses the British snack from Nestlé, which could take the American rights back if Hershey is sold. The arrangement gives the Swiss food group leverage to play kingmaker.

   Hershey spurned Mondelez’s $107 per share offer, saying it provided “no basis for further discussion.” Still, with the charitable trust that controls more than 80 percent of Hershey’s voting stock looking unstable, the company is arguably more vulnerable to a takeover approach than it has been for years. Along with Mondelez and Nestlé, rival confectioners Mars and Ferrero might plausibly be interested.

   Without Kit Kat, though, Hershey wouldn’t look quite so tasty. If the U.S. rights reverted to Nestlé, it would reduce Hershey’s value by $3 billion, the Wall Street Journal reported last week, citing a person familiar with the matter. The marketing pact dates back to the 1970s, when original creator Rowntree granted Hershey a perpetual license to sell its Kit Kat and Rolo brands stateside. But Nestlé is able to unwind the deal if another company acquires Hershey, according to news reports.

   Hershey also licenses Cadbury products in the United States, while Mondelez makes and sells them elsewhere. That’s a similar possible advantage for the only potential buyer that has so far gone public with its interest.

   The Kit Kat situation, however, hands some influence to Nestlé. The Swiss company’s recent emphasis on health and wellness might be one reason it would be reluctant to consider bidding for Hershey itself. But if the coy Pennsylvania chocolatier does eventually open up to a sale, at the very least it may need a break from Nestlé.

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Broadcast Coverage

4. Squawk on the Street

   Jul 6, 2016 | CNBC

   View Clip Here: http://app.criticalmention.com/app/#clip/view/23379435?token=3aacb50b-124c-4785-b1c5-9b4decea3cc4

   Rough Transcript: those who are wondering if we are going to get any news in terms Mondelez's pursuit of Hershey, you can see the stock at 110 of  course they rejected a one and seven are shared bid, half cash and half stock,  it doesn't appear that Mondelez is yet done, but it is  interesting this silence that's come from the Mondelez camp. It's also from my perspective, is trying to really understand the relationship between the board of the directors of Hershey and the ten person Trust that runs the Hershey Trust. They have differing objectives of course in terms of what they do with their relationship which has been dysfunctional in the past could end up being a key hear if Mondelez does keep trying.

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