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Hershey Media Report 7/8/16
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Is Mondelez/Pepsi A Match Made In Peltz's Heaven?
Jul 8, 2016 | Benzinga
By Wayne Duggan
Hershey Co HSY 's board of directors unanimously rejected Mondelez International Inc MDLZ 's $23 billion takeover bid, but investors may still be in for some surprise M&A twists and turns in the snack food industry. -
Shop Talk: When a Reese's Peanut Butter Cup ran away from an Oreo
Jul 8, 2016 | Financial Mail
By Zeenat Moorad
Cadbury owner Mondelez wanted Hershey so badly it was prepared to move its HQ and change its name. The maker of Reese’s Peanut Butter Cups and Kisses, who over years has mastered the art of rebuffing suitors, last week told Mondelez to, well, sod off. -
Dissecting The Mondelez Offer For Hershey And What Can Come Next
Jul 8, 2016 | Seeking Alpha
By Richard Berger
Always a bridesmaid, never a bride. We all know someone like that. Attractive, well liked, a real winner, but they never seem to find the right match. The Hershey Company (NYSE:HSY) is like that. An endless line of suitors come and go but none seem to offer what is needed to win her hand. A successful suitor will need to offer a package designed to please the Milton Hershey Trust, not Wall Street.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
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Is Mondelez/Pepsi A Match Made In Peltz's Heaven?
Jul 8, 2016 | Benzinga
By Wayne Duggan
Hershey Co HSY's board of directors unanimously rejected Mondelez International Inc MDLZ's $23 billion takeover bid, but investors may still be in for some surprise M&A twists and turns in the snack food industry.
Some veteran traders now speculate Mondelez’s offer was never intended to be accepted but was rather meant to entice a buyout bid for Mondelez itself.
One of the most likely big candidates for a Mondelez buyout is PepsiCo, Inc. PEP, which has been linked to Mondelez buyout rumors for years now. Back in April 2013, activist investor Nelson Peltz said Pepsi could choose to acquire Mondelez after Peltz took positions in both companies. Although a deal never happened, both companies reportedly agreed to work closely with Peltz in the future.
Related Link: Rales Brothers Hoping For Repeat Of Danaher's M&A-Driven Success Story
Since then, Mondelez has been aggressively cutting costs and streamlining its production processes. When Bill Ackman took a $5.6 billion stake in Mondelez last year, speculation of a Mondelez buyout returned. Credit Suisse analyst Rob Moskow said there was plenty of value in Mondelez and named Pepsi as the most likely buyer. He also mentioned Kraft Heinz Co KHC as a possible buyer.
It remains to be seen whether or not Mondelez had more up its sleeve than it may have seemed with its puzzling Hershey bid. So far this year, the stock is up 0.8 percent.
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Shop Talk: When a Reese's Peanut Butter Cup ran away from an Oreo
Jul 8, 2016 | Financial Mail
By Zeenat Moorad
Cadbury owner Mondelez wanted Hershey so badly it was prepared to move its HQ and change its name.
The maker of Reese’s Peanut Butter Cups and Kisses, who over years has mastered the art of rebuffing suitors, last week told Mondelez to, well, sod off.
The not-that-spectacular US$107/share or $23bn offer (a roughly 10% premium) was made after months of on-and-off discussions between the chocolate titans.
The story starts, I think, with a de-merger and a rather unfortunate name.
Kraft Foods in 2012 split into two Nasdaq-listed companies: Kraft Foods, a North American grocery business that makes, among other things mayonnaise and cream cheese, and Mondelez International, a global snack food powerhouse (think: Oreo cookies and Tuc crackers).
The idea was that Kraft would be primarily US focused, leaving Mondelez (pronounced Mohn-dah-Leez), to make a major play into emerging markets.
Through hardly any fault of its own, that hasn’t worked out very well.
Prospects in key emerging markets (EMs), once prime growth drivers, have worsened through a mix of structural and cyclical challenges.
EMs are still struggling to make a comeback. So Mondelez is in a boat not unlike other FMCG players Unilever, Procter & Gamble or PepsiCo.
Cue corporate austerity and cost-cuts to shush vocal shareholders.
The bid for Hershey then has a lot to do with geography. Mondelez makes most of its money from developing markets and needs exposure in a mature market like the US.
Now Hershey, which controls more than 45% of the chocolate market, is an American icon — but a vulnerable one.
Last year, sales fell for the first time in more than a decade. Naturally, blame lay on the anti-sugar brigade. Consumers are also more readily eating dark chocolate or unprocessed premium bars.
Hershey’s response? Wait for it. Biltong. Well, beef jerky to be precise. It acquired premium jerky maker Krave Pure Foods and also said it was rolling out snack bars with acai berries and jalapeno almonds (personally, I’ll take a Peanut Butter Cup any day — protein by another name ...)
My point, and I’m getting there, is that the amount of chocolate being sold is slipping. And there is only so much meaningful innovation one can do.
Gobbling each other up or, to be more polite, consolidation, is the fastest way to grow in a shrinking market.
A combined choccie conglomerate, which would surpass Mars as the largest global confectioner, also equals buying power and exerting some leverage on prices from traders. Hershey’s international expansion has been timid. Mondelez, through its elaborate distribution and marketing channel, can help with this.
A better bid is likely for a reluctant Hershey.
Mondelez boss Irene Rosenfeld is tough, and hardly one to be told to be on her merry way. An eventual deal would be the biggest takeover by Mondelez since Kraft bought Cadbury six years ago in a $19bn deal.
Where Rosenfeld’s unflinching resolve would be needed is around the charitable trust that controls about 81% of Hershey’s votes. A sale would be impossible without the approval of The Hershey Trust, which was set up by the company’s founder a century ago, to preserve Hershey’s ties to its local community. The trust, which itself is mired in scandal and is currently being investigated by the Pennsylvania attorney-general’s office, has blocked deals before. Mondelez, by the way, means “monde” Latin for “world” and deliz “delicious”.
Famed activist investor Nelson Peltz, who has prided himself on dishing out unsolicited advice to Rosenfeld, once said he hated the name Mondelez.
“It sounds like a disease — suffering from Mondelez.”
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Dissecting The Mondelez Offer For Hershey And What Can Come Next
Jul 8, 2016 | Seeking Alpha
By Richard Berger
Always a bridesmaid, never a bride. We all know someone like that. Attractive, well liked, a real winner, but they never seem to find the right match. The Hershey Company (NYSE:HSY) is like that. An endless line of suitors come and go but none seem to offer what is needed to win her hand. A successful suitor will need to offer a package designed to please the Milton Hershey Trust, not Wall Street.
Company: Mondelez International, Inc. (NASDAQ:MDLZ)
Current Price: $45.20
Dividend: $0.68 (1.05%)
Fair Value (Peter Lynch Value): $69.60
DCF Model (per gurufocus.com): $49.66
Prior Research: NONE
Company: The Hershey Company
Current Price: $89.35
Dividend: $2.33 (2.56%)
Fair Value: YDP (midpoint of high/low yield: $110)
($119.00 at 1.95% yield trend)
($99.15 at 2.35% elevated uncertainty yield)
Current Situation & Outlook:
The Hershey Company once again became the focus of an active suitor this past week when confectionery giant, Mondelez International Inc. extended an offer of approximately $107.00 per share. The offer, consisting of half cash and half stock, was immediately unequivocally rejected by the prospective bride's guardians, the HSY board of directors.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
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