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Hershey Media Report 8/31/16

National Coverage

Mondelez Plans ‘What’s Next’ After Hershey Rebuff
Aug 30, 2016 | Wall Street Journal
By Annie Gasparro

Now that a takeover of Hershey Co. is off the table, snack giant Mondelez International Inc. and its Chief Executive Irene Rosenfeld have signaled that ongoing cost cutting will be the way to profitability.
Mondelez looks beyond Hershey after deal talks fail
Aug 30, 2016 | Financial Times
By Lindsay Whipp

Far from being disappointed by the news that Mondelez International, which makes Cadbury’s chocolate and Oreos, has given up on buying Hershey, investors sent its shares up 3.6 per cent on Tuesday.
Bloomberg Mondelez Shifts From Hunter to Hunted After Hershey Deal Dies
Aug 31, 2016 | Bloomberg
By Craig Giammona

Mondelez International Inc. spent the past two months trying to coax Hershey Co. into accepting a takeover bid, a deal that would have created the world’s largest candy company. With those discussions dead, Mondelez is facing a very different outcome: It may become a target itself.
UPDATE: Hershey’s Failed Deal Renews Image as a Company Not for Sale
Aug 29, 2016 | Bloomberg
By Craig Giammona and Ed Hammond

The latest failed acquisition of Hershey Co. has renewed the chocolate maker’s reputation as a company that can’t be bought. After Mondelez International Inc. abandoned merger discussions on Monday, Hershey shares suffered their worst decline in almost 14 years and left investors with a familiar taste. For years, Hershey has been the subject of takeover speculation. And for years, deal talks have sputtered and died.
Hershey stock plummets 11 percent after Mondelez merger crumbles
Aug 30, 2016 | CNBC
By Sarah Whitten

Shares of Hershey fell 11 percent on Tuesday, a day after Oreo cookie maker Mondelez said it was no longer in talks to purchase the chocolate company.
Deals of the Day: Mondelez Drops Hershey Chase, KKR Nabs Calabrio
Aug 30, 2016 | Wall Street Journal
By Erik Holm

Brief mention of the rejection of the bid in Wall Street Journal's Deals of the Day. Relevant portion pasted below.
Consumer Sector Update for 08/30/2016: CBK,UAL,HSY,MDLZ
Aug 30, 2016 | Nasdaq.com

Brief mention of the rejected bid in Nasdaq.com's Consumer Sector Update. Relevant portion pasted below.
US Stocks Mostly Lower as Investors Wait for Jobs Report
Aug 30, 2016 | Associated Press
By Ken Sweet

Brief mentions of rejected bid from Mondelez in a greater article about stocks. Relevant portions pasted below.
Wall St. weighed by Apple but banks shine on leftright 2/2leftright
Aug 30, 2016 | Reuters
By Rodrigo Campos

Brief mention of the rejected bid from Mondelez in a greater article about stocks. Relevant portion pasted below.

Trade Coverage

Hershey Takeover Bid Dead; Uncertainty at Trust a Factor
Aug 30, 2016 | The Chronicle of Philanthropy

A corporate rival’s monthslong bid to acquire Hershey Co. is over following a rebuff of the latest takeover offer by the charitable trust that controls the giant chocolatier, reports The Wall Street Journal. Sources familiar with the matter told the newspaper that changing dynamics at the Hershey Trust would make it difficult for the candy company to strike any merger deal before next year.
Mondelez may merge with Kraft Heinz after ending Hershey pursuit: Analyst
Aug 31, 2016 | Confectionary News
By Douglas Yu

Mondelez has ended its pursuit of Hershey nearly two months after the US chocolate giant rejected a $23bn takeover. Analysts speculate the Oreo owner may now merge with Kraft Heinz or PepsiCo.
Reports: Hershey wanted more than Mondelez offered
Aug 30, 2016 | Central Penn Business Journal
By Roger DuPuis

Why did Mondelez International walk away from a bid for The Hershey Co.? Major media outlets are reporting that the Illinois-based maker of Oreo Cookies fell short of Hershey's $125 per share starting price.
The Hershey Co. Tumbles After Mondelez Deal Scrapped
Aug 30, 2016 | The Motley Fool
By Timothy Green

What: Shares of The Hershey Company (NYSE:HSY) sank on Tuesday following news that Mondelez International (NASDAQ:MDLZ) was dropping its bid to acquire the company. At 10:30 a.m. EDT, Hershey stock was down about 11%, while shares of Mondelez were up 4%. So what: Hershey received a $23 billion takeover bid from Mondelez in late June, a development that sent shares of the iconic chocolate company soaring. Hershey rejected the deal, but investors at the time expected a higher bid or even a bidding war could be coming.
Why We're Still Sweet on Hershey--and Mondelez, Too
Aug 30, 2016 | Morningstar
By Erin Lash

Since its initial interest surfaced two months ago, Mondelez (MDLZ) disclosed on Monday that it is dropping its pursuit of Hershey (HSY). It has been rumored the initial offer price was raised to $115 per share (from $107 originally)--which equates to $27 billion or 15 times EBITDA--however, in line with our prior assessment, this was still viewed as a bit low. We’ve maintained that assuming 3% cost synergies, an enterprise value/EBITDA multiple of 16-17 (north of the low to mid-teens multiples that tend to characterize deals in the space, but warranted, given the low levels of private-label penetration in the confectionery category combined with the attractive profitability Hershey generates) seemed reasonable, implying a price tag of nearly $30 billion or $120 per share, about 15% above our valuation.
Mondelez International (MDLZ) Drops Plan to Buy Hershey
Aug 30, 2016 | Zack's Equity Research

Mondelez International, Inc. (MDLZ - Analyst Report) recently confirmed that it is no more pursuing the possible merger with The Hershey Company (HSY - Analyst Report) . Following the announcement, shares of Hershey declined 11.70% in after-hours trading on Monday while that of Mondelez rose 3.81%.
Hershey (HSY) Stock Tumbles on Dropped Mondelez Bid
Aug 30, 2016 | The Street
By Annie Palmer

Shares of Hershey (HSY) were dropping 10.83% to $99.58 in pre-market trading on Tuesday after Mondelez (MDLZ) said yesterday it would no longer pursue an acquisition of the chocolate manufacturer.
Hershey's Board Has A Duty To Argue The Case For Why It Can Do Better Flying Solo
Aug 30, 2016 | Benzinga
By Jim Swanson

Credit Suisse’s Robert Moskow believes the announcement by Mondelez International Inc MDLZ 3.63% that it has ended discussions with Hershey Co HSY 11.18% regarding a potential combination is likely to lead to a negative reaction to the latter’s stock.
Hershey Should Be Ashamed of Itself
Aug 30, 2016 | The Street
By Brian Sozzi

Boy oh boy, did Hershey's (HSY) top brass just shaft its shareholders or what? The folks on the powerful Hershey Trust should be ashamed of themselves as they prepare to sun it up during the long holiday weekend. Not to take Mondelez's (MDLZ) interest as serious from the get-go was concerning from a pure shareholder-rights perspective.
Hershey: Buy On The Drop?
Aug 30, 2016 | Seeking Alpha

Hershey dropped 12% after hours after Mondelēz announced it was no longer looking to acquire the company. Shares had been inflated by those seeking the merger arbitration, leading to a significant outflow in the wake of the merger's collapse. HSY is now likely slightly undervalued and a good pickup following the drop. I rate Hershey a Buy on the drop.
Mondelez Abandons Bid To Create Snack-Candy Behemoth With Hershey Purchase
Aug 30, 2016 | Consumerist
By Ashlee Kieler

The residents of Hershey, PA, can breathe a sigh a relief today, as Mondelez — the owner of Nabisco and Cadbury — announced it would ditch its months-long bid to purchase the Hershey’s brand following several rebuffed offers by the chocolate giant.
Mondelez moves on from Hershey
Aug 30, 2016 | BakingBusiness.com
By Monica Watrous

Mondelez International, Inc. announced on Aug. 29 it has ended discussions with the Hershey Co. regarding a potential merger. Moving forward, the maker of Oreo cookies and Ritz crackers said it will continue to execute its plans to deliver sustainable growth and shareholder value.
Mondelez abandons Hershey pursuit
Aug 30, 2016 | Just Food
By Katy Askew

Mondelez International has ended discussions with Hershey over a potential acquisition, the Cadbury owner has announced. At the end of June, Hershey's board unanimously rejected a US$107-per-share bid from Mondelez that valued the Kisses maker at approximately $22.83bn.
Hershey: Bye, Bye Mondelez. Bye, Bye Takeover Premium
Aug 30, 2016 | Barron's
By Ben Levisohn

UBS analysts Steven Strycula and Zachary Ringer see shares of Hershey (HSY) fairly valued at $100 now that merger talks with Mondelez International (MDLZ) have ended. They explain why:
Is Hershey (HSY) Too Difficult to Buy? BloombergTV Weighs In
Aug 30, 2016 | The Street
By Amanda Schiavo

Shares of Hershey (HSY) are tumbling by 10.49% to $99.95 on Tuesday morning, after Oreo maker Mondelez (MDLZ) announced last night that it has abandoned it quest to acquire the chocolate maker.
Mondelez Drops Bid for Hershey
Aug 30, 2016 | FoodProcessing.com
By Lauren R. Hartman

Mondelez International, Inc., Deerfield, Ill., said Aug. 29 it has ended discussions with the Hershey Co. regarding a potential merger after the chocolatier rebuffed its latest acquisition offer, the second one since June, putting an end to a monthslong takeover campaign that would have created the world’s largest candy company. The company indicated it would be difficult to strike a deal before next year because of shifting dynamics at its controlling shareholder, the Hershey Trust Co., according to a report in the Wall Street Journal.
Mondelez: What’s Next After Kissing Off Hershey?
Aug 30, 2016 | Barron's
By Johanna Bennett

Now that Mondelez (MDLZ) has ended merger talks with Hershey (HSY), Morgan Stanley analysts Matthew Grainger, Pamela Kaufman and John Colantuoni see the snack food giant renewing its focus on its standalone growth prospects.
Why Abercrombie & Fitch Co. (ANF), Hershey Co (HSY) and Newmont Mining Corp (NEM) Are 3 of Today’s Worst Stocks
Aug 30, 2016 | InvestorPlace
By James Brumley

Brief discussion of Hershey stock following the rejected bid from Mondelez. Relevant portion pasted below.
US close: Stocks fall as traders look ahead to non-farm payrolls report
Aug 30, 2016 | Sharecast
By Renae Dyer

Brief mention of the rejected bid from Mondelez in a greater article about stocks. Relevant portion pasted below.
Why Mondelez International Inc (MDLZ), Potash Corporation of Saskatchewan (USA) (POT) and United Continental Holdings Inc (UAL) Are 3 of Today’s Best Stocks
Aug 30, 2016 | InvestorPlace
By Todd Shriber

Brief discussion of the rejected bid from Mondelez in the context of stocks. Relevant portion pasted below.
Hershey: Back in Play
Aug 30, 2016 | Seeking Alpha
By Drew Allen

Eight weeks ago, Hershey (NYSE:HSY) shareholders got a jolt when it was suddenly announced that Mondelez (NASDAQ:MDLZ) was pursuing a bid for the Hershey Company. While the specifics weren't immediately known, the price immediately jumped to nearly $120 per share from the mid $90s.
Jim Cramer's 'Mad Money' Recap: The Urge to Merge Rules Wall Street
Aug 30, 2016 | The Street
By Scott Rutt

Brief mention of the rejected bid from Mondelez in a discussion of Jim Cramer's broadcast clip, Mad Money, available for viewing in the broadcast section. Relevant portion pasted below.
'Hershey (HSY) Seems Too Resistant Against Any Kind Of An Acquisition,' CNBC's Najarian Says
Aug 30, 2016 | The Street
By Giovanni Bruno

hares of Hershey (HSY) were tanking 11.2% to $99.16 on Tuesday afternoon, as Mondelez (MDLZ) ends its pursuit of acquiring the Hershey, PA-based chocolate manufacturer. In light of the stock's decline today CNBC contributor Pete Najarian, co-founder of Najarian Family and Advisors Office, commented on the reports of the failed acquisition by Mondelez on this afternoon's "Fast Money Halftime Report."
Whither Mondelez After Hershey Bid Fails?
Aug 31, 2016 | Media Post
By Thom Forbes

Mondelez, which would not sweeten its takeover bid enough to suit Hershey’s taste, now may find itself turning into a tasty treat for another super-sized food company such as Kraft Heinz or PepsiCo, some observers say. Hershey, meanwhile, saw its share price plummet 11% in late trading Tuesday, a day after Mondelez announced that it was dropping its bid. It had risen recently on speculation that Mondelez would prevail.
Why Mondelez Is Ending Its Pursuit of Hershey
Aug 30, 2016 | Investopedia
By Erik Voklman

In the latest of a lengthening series of unconsummated merger attempts this year, candy and snacks giant Mondelez (NASDAQ: MDLZ) has formally withdrawn from its pursuit of Hershey (NYSE: HSY). In a tersely worded statement on the matter, Mondelez only said: "Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement."
Mondelez plans next steps after Hershey rebuff
Aug 31, 2016 | Seeking Alpha
By Yoel Minkoff

Now that a takeover of Hershey is off the table, Mondelez (NASDAQ:MDLZ) and its chief executive have signaled that ongoing cost cutting will be the way to profitability.

Broadcast Coverage

Varney & Company
Aug 30, 2016 | FBN

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Michaela
Aug 30, 2016 | HLN

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Squawk on the Street
Aug 30, 2016 | CNBC

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Bloomberg Markets
Aug 30, 2016 | Bloom

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Varney & Company
Aug 30, 2016 | FBN

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Squawk Alley
Aug 30, 2016 | CNBC

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Bloomberg Markets
Aug 30, 2016 | Bloom

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Fast Money Halftime Report
Aug 30, 2016 | CNBC

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Power Lunch
Aug 30, 2016 | CNBC

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Cavuto Coast to Coast
Aug 30, 2016 | FBN

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Bloomberg Markets
Aug 30, 2016 | Bloom

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Countdown to the Closing Bell with Liza Claman
Aug 30, 2016 | FBN

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Bloomberg Markets
Aug 30, 2016 | Bloom

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After the Bell
Aug 30, 2016 | FBN

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Mad Money
Aug 30, 2016 | CNBC

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Mad Money
Aug 31, 2016 | CNBC

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Full Text of Stories Below

National Coverage

Mondelez Plans ‘What’s Next’ After Hershey Rebuff

Aug 30, 2016 | Wall Street Journal

By Annie Gasparro

Now that a takeover of Hershey Co. is off the table, snack giant Mondelez InternationalInc. and its Chief Executive Irene Rosenfeld have signaled that ongoing cost cutting will be the way to profitability.
Mondelez investors seemed to welcome the end of the months-long play by the Oreo maker for the famous chocolate company. In late U.S. trading Tuesday—a day after Mondelez said it walked away from its pursuit of the big chocolate maker—Mondelez shares were up 4%, while Hershey shares were down nearly 11%. Mondelez’s latest bid was rejected by Hershey last week, according to people familiar with the matter.
In fact, some Mondelez stakeholders, like activist investor William Ackman who holds a 5.6 % stake including options, have made it clear that executives should keep their heads down and focus on slashing expenses since its profit margin was among the worst in the industry as of a couple of years ago.
But while free to focus on meeting cost-cutting targets, Mondelez could face fresh questions about whether it now risks becoming a takeover target itself.
A deal with Hershey would have created the world’s largest candy company, eliminating virtually any chance of Mondelez being targeted by a rival. Merging with Hershey would have let Mondelez “control their own destiny,” said Brittany Weissman, an analyst at Edward Jones.
Some industry observers said that while Mondelez now could be relatively attainable by a larger player in the food-and-beverage industry, like Kraft Heinz Co. or PepsiCo Inc., its current market value of about $70 billion makes it a tough target, especially if it is unwilling to sell.
Yet the latest turn of events puts even more pressure on Mondelez management to produce results on the cost-cutting front.
Ms. Rosenfeld has promised to expand the company’s operating margin to 17% to 18% by 2018. They hit 15% in the most recent quarter.
Mr. Ackman, and other activists like Trian Fund Management LP, who holds a 3 % stake and whose co-founder, Nelson Peltz, has a seat on the board, are particularly focused on her hitting that target, according to people familiar with the matter.
That focus will also likely reduce Mondelez’s flexibility to buy assets, as seen by Mr. Ackman’s public concern the Hershey deal would “distract” from hitting the margin target.
Ms. Irene Rosenfeld, who has spent a decade as CEO with several interactions with activist investors, has said Mondelez doesn’t need an acquisition to improve its profitability. “Our discussions with Hershey were motivated by our belief that a combination offered a unique opportunity to enhance the prospects of both companies,” said a spokesman for Mondelez on Tuesday. The company wouldn’t make Ms. Rosenfeld available for comment.
For Hershey, its stock had risen over the past several months on speculation of a buyout. With other suitors unlikely, Hershey’s stock deflated on Tuesday.
Some industry observers say another bid by Mondelez for an international candy maker like Ferrero isn't out of the question.
In the past, Ms. Rosenfeld has been pressured by Mr. Peltz to consider merging with PepsiCo’s Frito-Lay business.
Companies have often looked to deals to help reduce overall costs as consumers’ appetite for healthier and more natural food also hurt businesses that sell sweets.
Industry analysts had questioned Mondelez’s offer, which would have been valued at upward of $25 billion, arguing that Hershey is largely concentrated in the U.S. and the candy aisle, both of which have seen slowing sales growth in recent years.
The explosion of food merger and acquisition activity last year led to more than $116 billion worth of deals involving U.S. companies, the largest total dollar amount in at least two decades, according to data from Dealogic.
In moves that catered to the growing population of health-driven customers, Danone SAannounced a $10.4 billion takeover of WhiteWave Foods Co. last month. Last summer,Hormel Foods Corp. made what it said was its largest ever acquisition when the company paid $775 million for organic-meats company Applegate Farms LLC. In 2014, General Mills Inc. paid $820 million for Annie’s Inc., known for its organic macaroni and cheese.
Mondelez has a complex deal-making history. The company is the product of a 2012 separation from Kraft Foods Inc., which had been under pressure from Trian and other activist investors. That came only two years after Kraft had acquired the U.K. chocolate company Cadbury PLC for $19 billion, and the chocolate assets went with Mondelez in the separation.
Corrections & Amplifications:
But without the Hershey combination, Mondelez could be relatively attainable by a larger player in the food-and-beverage industry. An earlier version of this article incorrectly stated that Mondelez could be relatively attainable by a larger player with a merger.

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Mondelez looks beyond Hershey after deal talks fail

Aug 30, 2016 | Financial Times

By Lindsay Whipp

Far from being disappointed by the news that Mondelez International, which makes Cadbury’s chocolate and Oreos, has given up on buying Hershey, investors sent its shares up 3.6 per cent on Tuesday.
Hershey, which sells Reese’s Peanut Butter Cups, had refused to entertain negotiations without at least $125 a share on the table — far above Mondelez’s initial bid of $107.
Analysts said they think Mondelez’s acquisitive chief executive Irene Rosenfeld has better options. The company is heavily focused outside the US and some investors were not particularly excited about buying a rival that was far more American at a time when consumer tastes were changing.
“Monday’s release is a positive development for Mondelez shareholders, in our view,” said UBS analyst Steven Strycula. “Since Mondelez/Hershey discussions made headlines in late June, buyside feedback has been decidedly negative.
“Many investors we had spoken to viewed Hershey as a distraction and deviation from Mondelez’s otherwise attractive investment case (emerging market play and margin expansion).”
Hershey investors were less impressed as its shares tumbled 11 per cent to $99.50. The trust that controls the Pennsylvania-based company is in turmoil because of governance and director changes following an investigation by the state’s attorney-general. In these circumstances, many observers believe a takeover would never be approved.
Mr Strycula said that Mondelez, whose shares were up at $44.54 at lunchtime on Tuesday, is trading near 20.5 times consensus 2017 earnings per share estimates, which is below the broader food industry at 22.5 times.
Food and beverage companies, including Mondelez, have been through some gruelling years.
The acquisition and merger of Kraft and Heinz by 3G has shaken up the industry, by demonstrating how much profit margins can be improved through cost cutting.
At the same time, brand name food producers have had to grapple with a revolution in consumer habits that has forced them to reformulate their packaged food, and buy smaller companies with healthier options while still convincing shoppers that indulgence is sometimes good.
Within this environment, Mondelez appears to have three clear options now that it has pulled back from Hershey.
The first would be to maintain its appetite for acquisitions and pursue other candy or snackmakers. Pablo Zuanic, an analyst at Susquehanna International Group, pointed to potential combinations for Mondelez including Europe’s Ferrero, best known for chocolate, and Perfetti Van Mellem, maker of Mentos and chewing gum.
The second would be to buy up smaller snack or candymakers that fit into its strategy of selling healthier products. Mondelez has promised to generate half of its sales from so-called “wellbeing” snacks, up from one-third currently, amid increasing regulatory pressure across the globe to reduce sodium and sugar in food.
In her statement on Monday, Ms Rosenfeld alluded to further dealmaking ambitions.
“While we are disappointed in this outcome [with Hershey], we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term,” she said.
Finally, Mondelez could become an attractive target for a rival, such as Kraft Heinz, a possibility that is being discussed by analysts amid speculation that 3G may be on the prowl again. Other names in the mix are cereal groups General Mills and Kellogg.
Nelson Peltz’s Trian Partners fund, which gained a seat on the Mondelez board, has stopped agitating for a merger with PepsiCo’s Frito-Lay snack division, but that is a combination that still interests some analysts.
Alexia Howard, an analyst at Bernstein, said in a recent note to investors that “an acquisition of Hershey would delay any potential merger between Mondelez and Frito-Lay, which we consider to be a much more attractive target due to its overseas exposure.”
But Susquehanna’s Mr Zuanic said that the Kraft Heinz combination appeared to be the more likely outcome. Mondelez and Kraft split into separate companies in 2012, with the former focusing on international snacking. A merger would bring the two halves back together.
“A merger with PepsiCo could not be ruled out but we see that more as a long shot,” he said. “But in the end we think Mondelez will just run out of time and will be taken over by Kraft Heinz.”

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Bloomberg Mondelez Shifts From Hunter to Hunted After Hershey Deal Dies

Aug 31, 2016 | Bloomberg

By Craig Giammona

Mondelez International Inc. spent the past two months trying to coax Hershey Co. into accepting a takeover bid, a deal that would have created the world’s largest candy company.
With those discussions dead, Mondelez is facing a very different outcome: It may become a target itself.
The snack giant, known for Oreos, Triscuits and other household brands, could have used the $23 billion Hershey merger to bulk up and ward off potential acquirers. But the company said Monday there was “no path forward” to a deal and walked away from discussions. The question now for Chief Executive Officer Irene Rosenfeld is if there are any other buyout candidates -- and whether getting swallowed by a bigger food giant such as Kraft Heinz Co. is inevitable.
“There really aren’t many obvious options,” said Ken Shea, an analyst at Bloomberg Intelligence. “Hershey was a unique opportunity. They were willing to do it because it was an obvious fit.”
Without a Hershey deal on the horizon, Mondelez has to cope with a sluggish food industry and overseas headwinds on its own. The Deerfield, Illinois-based company, which generates about 75 percent of its revenue outside North America, has been hurt by the strong U.S. dollar and slowing international economies. While Rosenfeld is turning to cost cuts to bolster earnings, activist investors have been looking for a more transformative move. Renewed pressure may again put the company in the cross hairs of a larger rival.Kraft’s Shadow
The name most often mentioned is Kraft Heinz, the packaged-food giant formed in a 2015 merger orchestrated by the private equity firm 3G Capital and Warren Buffett. The prospect of a Kraft Heinz takeover is one reason Mondelez shares rose on the news that the Hershey deal was dead, Chris Growe, an analyst at Stifel Financial Group, said in a note. Investors saw Hershey as a barrier to a bigger prize: a buyout of Mondelez.
“Investors seeking an opportunity from a combination of Mondelez and Kraft Heinz likely saw this transaction as extremely prohibitive,” Growe said.
A Kraft deal would reunite two businesses that were once under the same roof. Mondelez split from Kraft Foods in 2012, a breakup that was intended to help the companies hone their focus and bring greater shareholder returns. Mondelez was set up to sell snacks in emerging markets, where a burgeoning middle class would gobble up Oreos and Cadbury chocolate. Kraft, meanwhile, would concentrate on the slower-growing domestic market.Domestic Appeal
But economic challenges overseas, particularly in Brazil and China, have been hard on Mondelez. The U.S., in contrast, has been a surprisingly attractive market. That was part of the rationale for Mondelez trying to acquire Hershey, which generated almost 90 percent of its revenue in North America last year. The talks stalled after Hershey asked buyout negotiations to begin at $125 a share, according to a person familiar with the discussions. That was well above the $115 Mondelez offered, the person said. The nonprofit trust that controls Hershey was another obstacle to a deal.
Rosenfeld, 63, said on Monday that Mondelez may still pursue its own acquisitions. And there are some possibilities, according to Pablo Zuanic, an analyst at Susquehanna International Group. The company could try to buy a European candy maker -- or look to a regional U.S. business that would expand its natural and organic snack offerings. Instead, it’s more likely that Kraft Heinz will swoop in, he said in a note.Clock Ticking
“In the end, we think Mondelez will just run out of time and be taken over,” Zuanic said.
Part of the reason Mondelez is considered vulnerable is its profit margins have lagged those of food-industry rivals. Bill Ackman, the billionaire hedge fund manager, took a large stake in Mondelez last year and called for Rosenfeld to improve the company’s performance.
There is pressure across the U.S. food industry to boost margins. Consumers have shifted away from products that dominated grocery store shelves for decades, hurting the profitability of iconic brands. Though companies are trying to refine their product portfolios, they’re also relying more heavily on cost cutting.Zero-Based Budgeting
3G, the Brazilian investment firm, has led the way. After orchestrating the takeover of H.J. Heinz -- and then Kraft -- 3G’s managers have imposed zero-based budgeting, an increasingly popular form of belt tightening that forces employees to justify every cost. At Kraft Heinz, they have slashed spending on travel, electricity and even office supplies.
The approach helped produce industry-leading margins at H.J. Heinz after 3G took it private in 2013. When 3G and Buffett acquired Kraft two years later, they began the process over again there.
To keep pace, Mondelez has sought $3 billion in cost cuts by 2018. Like its food-industry competitors, the company has relied on zero-based budgeting to trim its travel and technology budgets. But it hasn’t been enough to satisfy investors. Prior to the stock’s rally Tuesday, the shares had slumped 4 percent this year.
Barring another defensive move, a reunion with Kraft Heinz may be coming, Shea said. With a valuation of about $70 billion, Mondelez would be out of reach for most other suitors.
“There’s a small number of companies who could afford it,” Shea said. “Kraft Heinz is most obvious one -- you’re starting to hear a lot of buzz about what they’re going to do.”

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UPDATE: Hershey’s Failed Deal Renews Image as a Company Not for Sale

Aug 29, 2016 | Bloomberg

By Craig Giammona and Ed Hammond

The latest failed acquisition of Hershey Co. has renewed the chocolate maker’s reputation as a company that can’t be bought.
After Mondelez International Inc. abandoned merger discussions on Monday, Hershey shares suffered their worst decline in almost 14 years and left investors with a familiar taste. For years, Hershey has been the subject of takeover speculation. And for years, deal talks have sputtered and died.
The most recent rejection came after Mondelez proposed sweetening its offer to $115 a share, according to a person familiar with the situation. That was 18 percent higher than the stock’s price before deal talks were disclosed in June, but Hershey wanted to start the discussions at $125, said the person, who asked not to be identified because the negotiations were private. Turmoil at the Hershey Trust, the nonprofit organization that controls the company, also hampered merger talks.
Hershey, already struggling with shifting consumer tastes and an ill-fated expansion into China, may now have also scared away future suitors.
“We do not believe another bidder is likely to emerge for Hershey,” Chris Growe, an analyst at Stifel Financial Corp., said in a report. “We believe Mondelez’s challenge in pursuing Hershey will likely dissuade other buyers from attempting a transaction.”
No Path Forward
Mondelez’s initial $107-a-share offer in cash and stock would have valued Hershey at about $23 billion. Hershey’s board said on June 30 that it unanimously rejected that bid. Talks continued, but Mondelez said on Monday that it saw “no actionable path forward toward an agreement.”
The announcement sent Hershey shares down as low as $98.75 in New York, a 12 percent plunge that erased much of their recent rally. The stock had climbed 25 percent this year through Monday’s close, with most of that gain coming when news of Mondelez’s approach became public.
A Gadfly analysis of why Mondelez is better off without Hershey
Ending the pursuit of Hershey brought some relief to Mondelez investors, who may have been concerned about a takeover battle. Shares of the Deerfield, Illinois-based company rose as much as 4.8 percent to $44.09 in New York.
Mondelez Chief Executive Officer Irene Rosenfeld, who saw the deal as a chance to create the world’s largest candy company, lamented that the two sides couldn’t reach an agreement.
“Combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery,” she said in Monday’s statement. “While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions.”Good Fit?
The merger would have given Mondelez a bigger share of the domestic market -- a weak spot for the maker of Oreos and Triscuits. Hershey generated almost 90 percent of its revenue in North America last year, with the majority of that coming from selling chocolate in the U.S. Mondelez, meanwhile, has suffered from currency fluctuations and slowing overseas economies.
“The strategic fit with Mondelez was pretty compelling,” Bloomberg Intelligence analyst Ken Shea said. “Not a lot of other companies can do that kind of combination.”
Hershey owns the Cadbury license in the U.S., while Mondelez sells the candy in the rest of the world. Unifying that brand was considered part of the rationale for the merger.
But when Hershey snubbed the $107-a-share bid in June, it said that the offer “provided no basis for further discussion between Mondelez and the company.” Though Mondelez was willing to raise the price by $8 a share, Hershey demanded at least $125, said the person with knowledge of the matter. The Wall Street Journal previously reported on the negotiations.Trust Upheaval
Then there’s the Hershey Trust. The $12 billion charity organization is in flux, with many of its directors headed for the exits. Hershey didn’t want to even consider a transaction with Mondelez until the charity’s board is reconstituted next year, another person familiar with the situation said.
The trust, which runs Hershey Entertainment & Resorts Co., controls about 81 percent of the chocolate company’s voting shares. It also operates the Milton Hershey School, which educates underprivileged children. After facing accusations of lavish spending in recent years, the charity reached a deal in July with the Pennsylvania attorney general to reform its management practices. That agreement called for three board members to retire by the end of the year, with two more stepping down by end of 2017.Earlier Attempts
The trust has scuttled takeovers in the past. Nestle and Wm. Wrigley Jr. Co. both made offers to buy the company in 2002 before being rebuffed. The trust also has stood between Hershey and a deal with Cadbury, which was ultimately acquired by Kraft Foods.
Another wrinkle: The Pennsylvania attorney general has the right to review a deal to acquire Hershey. That’s because the trust is legally obligated to continue financing the Milton Hershey School. Because the organization is supported by profits from the chocolate company, the state can try to stop a sale if it determines that school funding is threatened.
To entice Hershey and its stakeholders, Mondelez offered some unusual concessions with its bid. The suitor pledged to keep the combined company in Hershey, Pennsylvania, and retain the Hershey name, according to the Journal. With the trust’s recent upheaval, Mondelez may have felt like it picked the right time to pounce. It wasn’t.
Mondelez “misread the situation,” Pablo Zuanic, an analyst at Susquehanna International Group, said in a report. “In hindsight to us, it looks poorly planned.”

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Hershey stock plummets 11 percent after Mondelez merger crumbles

Aug 30, 2016 | CNBC

By Sarah Whitten

Shares of Hershey fell 11 percent on Tuesday, a day after Oreo cookie maker Mondelez said it was no longer in talks to purchase the chocolate company.
Hershey stock was on track for its worst daily performance since September 2002, when the shares fell 11.9 percent. That decline was triggered when the Hershey Trust, the company's controlling shareholder, told the chocolate maker to terminate its proposed deal with Wrigley.
Shares of Mondelez, meanwhile, were up more than 3 percent in midday trading.
Mondelez CEO Irene Rosenfeld said in a statement Monday that after additional discussions, the company decided "there is no actionable path forward toward an agreement."
Rosenfeld faced staunch opposition from the Hershey Trust, a $12 billion charity created by the company's founder a century ago. The trust owns 34 percent of the company's shares and controls about 80 percent of the vote.
If it had agreed to merge with Mondelez, Hershey stood to lose its U.S. license for Kit Kat, which is produced globally by Nestle.

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Deals of the Day: Mondelez Drops Hershey Chase, KKR Nabs Calabrio

Aug 30, 2016 | Wall Street Journal

By Erik Holm

Mondelez drops Hershey bid. Oreo cookie maker Mondelez International ended its pursuit of Hershey Co. after the famed chocolatier rebuffed its latest acquisition offer, putting an end to a monthslong takeover campaign that would have created the world’s largest candy company. [WSJ]

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Consumer Sector Update for 08/30/2016: CBK,UAL,HSY,MDLZ

Aug 30, 2016 | Nasdaq.com

(-) HSY, (-11.1%) Mondelez International ( MDLZ) scraps $23 bln merger bid, concluding there was no "actionable path forward" following July 29 deal reforming management of Milton Hershey Trust and forcing out three of its members.

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US Stocks Mostly Lower as Investors Wait for Jobs Report

Aug 30, 2016 | Associated Press

By Ken Sweet

Shares of the candy company Hershey plunged after it walked away from a merger proposal, and Apple slipped after the company was hit with a large tax bill in Europe.
...
In other company news, Hershey fell $12.02, or 11 percent, to $99.65 after snack food company Mondelez International said it was walking away from its proposal to buy Hershey for roughly $25 billion.
Mondelez, which makes Oreo cookies and other snack foods, initially proposed to buy the company earlier this summer, but Hershey is a notoriously difficult company to propose mergers with since the majority of the shares are controlled by a non-profit organization.

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Wall St. weighed by Apple but banks shine on leftright 2/2leftright

Aug 30, 2016 | Reuters

By Rodrigo Campos

Hershey (HSY.N) dropped 11.2 percent to $99.19 after Mondelez (MDLZ.O) abandoned its pursuit to buy the chocolate maker on Monday. Mondelez rose 3.7 percent.

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Trade Coverage

Hershey Takeover Bid Dead; Uncertainty at Trust a Factor

Aug 30, 2016 | The Chronicle of Philanthropy

A corporate rival’s monthslong bid to acquire Hershey Co. is over following a rebuff of the latest takeover offer by the charitable trust that controls the giant chocolatier, reports The Wall Street Journal. Sources familiar with the matter told the newspaper that changing dynamics at the Hershey Trust would make it difficult for the candy company to strike any merger deal before next year.
The $12.3 billion charity, which operates a private boarding school for low-income youths and controls 81 percent of Hershey Co. voting shares, is overhauling its board and governance under an agreement with Pennsylvania regulators following years of financial scandals and internal squabbles.
Mondelez International, maker of Oreos and other popular snack brands, made a $23 billion bid for Hershey in June, but its offer of $107 a share was rejected by the trust. The suitor upped the offer to $115 a share last week, according to the Journal, but Hershey set a floor of $125 and said any deal would have to wait for the reconstitution of the trust, a process not expected to be done before late 2017. Mondelez said in a statement Monday that it was calling off the pursuit, which aimed to create the world’s largest candy company.

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Mondelez may merge with Kraft Heinz after ending Hershey pursuit: Analyst

Aug 31, 2016 | Confectionary News

By Douglas Yu

Mondelez has ended its pursuit of Hershey nearly two months after the US chocolate giant rejected a $23bn takeover. Analysts speculate the Oreo owner may now merge with Kraft Heinz or PepsiCo.
Mondelez reportedly upped its bid for Hershey to around $25bn, but said yesterday it had abandoned its pursuit.
Mondelez's CEO, irene Rosenfield, said in a statement: "Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands."
She added that taking into account recent shareholder developments at Hershey (referring to changes at the Hershey Trust), Mondelez determined that "there is no actionable path forward toward an agreement."
Analysts also believe Mondelez's Hershey pursuit was spurred by recent changes within the Hershey Trust, which holds 81% of Hershey shares.
The current Trust board has nine members, among which three of them will leave by the end of this year, and two by end of 2017, following an agreement between the Trust and the Pennsylvania Attorney General.
Either merge with large-scale companies or be taken over by Kraft
If Mondelez indeed wants to expand its confectionery and snacks footprint, it should seek acquisitions or mergers with other large-scale companies in that space, including Lotte, Ferrero, or Perfetti Van Melle, according to SIG's analyst, Pablo Zuanic.
"In snacks, of course, there are smaller players in the natural and organic space," he added. However, in the end, SIG believes Mondelez will just run out of time and will be taken over by Kraft Heinz Company, according to Zuanic's note in SIG's report.
Mondelez's spokesperson Valer Moens told ConfectioneryNews the company cannot comment on any possible purchase move in the next 12 months.
Mondelez leaders are schedule to present at the Barclays Global Consumer Staples Conference on Wednesday, Sept. 7 at 9 a.m. EDT.
Morningstar analyst Erin Lash previously said in a note that it was "far from a surprise" that Mondelez is interested in the US chocolate space because the company has essentially been locked out of the US chocolate category after Hershey acquired the rights to the Cadbury US brands in 1988.
Mondelez recently bought the licenses to produce Cadbury-branded biscuits form UK's Burton's Biscuits Company.

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Reports: Hershey wanted more than Mondelez offered

Aug 30, 2016 | Central Penn Business Journal

By Roger DuPuis

Why did Mondelez International walk away from a bid for The Hershey Co.?
Major media outlets are reporting that the Illinois-based maker of Oreo Cookies fell short of Hershey's $125 per share starting price.
On the record, the companies are not talking about numbers. But sources talking to national reporters behind the scenes seem to be.
Illinois-based Mondelez, maker of Oreo cookies and numerous other snack other brands, initially made a $23 billion pitch, which was rejected by Hershey's board on June 30.
Mondelez Chairman and CEO Irene Rosenfeld on Monday said, "Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement."
What might that mean?
Bloomberg is reporting that the original offer, at $107 per share, was later increased to $115 per share before backing away, citing a person familiar with the private talks, and who asked not to be identified. Hershey's starting point was $125 per share, the source reportedly said.
The Wall Street Journal published a similar report, which said Rosenfeld herself last week privately indicated to Hershey CEO J.P. Bilbrey that Mondelez would go up to $115 per share.
WSJ reported Hershey indicated no deal would be possible before a reconstitution of the Hershey Trust Co., which isn't expected to happen until sometime next year.
The charitable trust is Hershey's main stockholder, controlling more than 80 percent of the company's voting shares, which gives the body significant leverage over any possible sale of the Dauphin County candy company. Three members of the trust's board also sit on the Hershey Co. board.
Following investigation into its operations and governance by the state Attorney General's Office, the trust last month agreed to new restrictions, which will increase board size and limit members' tenure. Under that deal, five current members, including Chairwoman Velma Redmond, will retire through Dec. 31, 2017.
Meanwhile, neither company would elaborate publicly on merger talks after the June 30 rejection,even as major media outlets were reporting that inside sources were saying that the talks were not dead.
This morning, Hershey spokesman Jeff Beckman acknowledged only that "there were additional communications from Mondelez."
"And we can confirm our understanding that Mondelez is no longer pursuing a combination with Hershey. Beyond this we are providing no further comments," Beckman concluded.
As the New York Times pointed out, the past three months have seen a spike for both companies' stock, followed by some lesser peaks and valleys, with Hershey trending slightly upward as Mondelez trended slightly downward.
That changed on Monday.
Hershey's shares fell nearly 12 percent in after-hours trading, hitting $98.06. Their value was at $99.54 as of mid-morning today.
Mondelez, meanwhile, gained about 3 percent, the New York Times noted. That stock stood at $44.67 at mid-morning.
Shares of Hershey tumbled almost 12 percent in after-hours trading, while those of Mondelez gained about 3 percent.
Here's what Reuters had to say about the story, and here is Fortune's report.

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The Hershey Co. Tumbles After Mondelez Deal Scrapped

Aug 30, 2016 | The Motley Fool

By Timothy Green

What: Shares of The Hershey Company (NYSE:HSY) sank on Tuesday following news thatMondelez International (NASDAQ:MDLZ) was dropping its bid to acquire the company. At 10:30 a.m. EDT, Hershey stock was down about 11%, while shares of Mondelez were up 4%.
So what: Hershey received a $23 billion takeover bid from Mondelez in late June, a development that sent shares of the iconic chocolate company soaring. Hershey rejected the deal, but investors at the time expected a higher bid or even a bidding war could be coming.
Hershey is controlled by the Hershey Trust, an entity that maintains over 80% of the voting power at Hershey. Any deal would have required the trust's approval, and while Mondelez had reportedly offered to make concessions, including a promise to protect jobs and rename the combined company Hershey, getting the approval of the trust posed a major obstacle.
Two months was enough time for Mondelez to decide that pursuing Hershey wasn't worth it. In a press release on Tuesday, the company stated that it was no longer pursuing a combination with Hershey.
Now what: "Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands," said Mondelez CEO Irene Rosenfeld. "Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement."
While Hershey shares are lower on the news, the stock is still up from just prior to the original acquisition announcement. While a combination with Mondelez would have created a snack and chocolate behemoth, Hershey will continue to go at it alone.

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Why We're Still Sweet on Hershey--and Mondelez, Too

Aug 30, 2016 | Morningstar

By Erin Lash

Since its initial interest surfaced two months ago, Mondelez (MDLZ) disclosed on Monday that it is dropping its pursuit of Hershey (HSY). It has been rumored the initial offer price was raised to $115 per share (from $107 originally)--which equates to $27 billion or 15 times EBITDA--however, in line with our prior assessment, this was still viewed as a bit low. We’ve maintained that assuming 3% cost synergies, an enterprise value/EBITDA multiple of 16-17 (north of the low to mid-teens multiples that tend to characterize deals in the space, but warranted, given the low levels of private-label penetration in the confectionery category combined with the attractive profitability Hershey generates) seemed reasonable, implying a price tag of nearly $30 billion or $120 per share, about 15% above our valuation.
From a strategic perspective, we haven’t wavered from our stance that a deal could have been advantageous for both firms, affording Mondelez entry into the attractive U.S. chocolate space while also facilitating Hershey’s expansion beyond its home turf. But despite these merits, we weren’t convinced that even a higher price tag would make Hershey amenable to an agreement. Rather, we’ve long thought that the sizable hurdle to a deal was that Hershey is a controlled company, with more than 80% of the voting power held by the Milton Hershey School Trust, which depends on Hershey's dividends to fund its operations. We think this ultimately proved the demise to a tie-up.
Even with this news, we don't intend to change our $48 and $105 fair value estimates for Mondelez and Hershey, respectively. But with shares of both firms trading at a discount to our valuation, and in light of the leading brands and entrenched retail relationships each firm maintains, we think investors should keep shares of both wide moat names on their radar.

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Mondelez International (MDLZ) Drops Plan to Buy Hershey

Aug 30, 2016 | Zack's Equity Research

Mondelez International, Inc. (MDLZ - Analyst Report) recently confirmed that it is no more pursuing the possible merger with The Hershey Company (HSY - Analyst Report) . Following the announcement, shares of Hershey declined 11.70% in after-hours trading on Monday while that of Mondelez rose 3.81%.
In June, Mondelez offered to acquire Hershey for about $22.8 billion worth of cash and stocks. Mondelez had offered to pay $107 a share, half in cash and half in stock. Mondelez had expected that the merger of the two food giants would create a global leader in snacking, confectionary and complementary brands. However, Hershey’s board of directors unanimously rejected the offer in June.
Mondelez eventually reached the decision after several discussions, taking into account the recent changes in shareholders at Hershey. Reportedly, The Hershey Trust, the company’s largest shareholder, was reluctant about the sale. Moreover, significant changes in management of the Hershey Trust are underway and are expected to take time to complete.
Hershey’s sales trends have been weak since 2014 due to weak category trends, increased competition from broader snacking category and soft international growth. Notably, Mondelez’s volumes have been hurt by category weakness on account of soft consumer demand since 2014. However, both the companies recorded strong margins in the past few quarters backed by cost savings and productivity gains.

Mondelez intends to update investors at Barclays Global Consumer Staples Conference on Sep 7.

Both Hershey and Mondelez carry a Zacks Rank #3 (Hold).

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Hershey (HSY) Stock Tumbles on Dropped Mondelez Bid

Aug 30, 2016 | The Street

By Annie Palmer

Shares of Hershey (HSY) were dropping 10.83% to $99.58 in pre-market trading on Tuesday after Mondelez (MDLZ) said yesterday it would no longer pursue an acquisition of the chocolate manufacturer.
After additional discussions and weighing recent shareholder developments, Mondelez said in a statement after yesterday's market close that there is "no actionable path forward" in its bid to buy the Derry Township, PA-based company.
Mondelez in June offered as much as $23 billion, or $107 per share, to purchase Hershey. The company rebuffed the proposal, saying that the starting point for discussions would need to be $125 per share.
Additionally, Hershey said the deal couldn't be made until the trust board is reconstituted, which likely won't happen until next year.
Mondelez made another offer as recently as last week of $25 billion, or $115 per share, according to the Wall Street Journal.
The East Hanover, NJ-based snack company's CEO Irene Rosenfeld had plans to create a snacking and confectionary giant that would dominate on a global scale, the Journal added.
If the companies had combined, they would have seen sales increase between 9% and 19%.
Shares of Mondelez were higher in pre-market trading on Tuesday.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
TheStreet Ratings Team rates HERSHEY CO as a Buy with a ratings score of B. This is driven by some important positives, which it believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks it covers. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, expanding profit margins and solid stock price performance. The team feels its strengths outweigh the fact that the company has had generally high debt management risk by most measures that it evaluated.

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Hershey's Board Has A Duty To Argue The Case For Why It Can Do Better Flying Solo

Aug 30, 2016 | Benzinga

By Jim Swanson

Credit Suisse’s Robert Moskow believes the announcement by Mondelez International Inc MDLZ 3.63% that it has ended discussions with Hershey Co HSY 11.18% regarding a potential combination is likely to lead to a negative reaction to the latter’s stock.
Moskow maintains a Neutral rating on Hershey with a price target of $112.Value Creation Needed
The analyst mentioned, “[B]roken deals like these often lead to material changes at the intended target and sometimes accelerated shareholder value creation.”
Moskow believes Hershey’s board now has fiduciary duty to create a strong business case, along with the management team, for why Hershey can create value as an independent entity rather than in combination with a multinational competitor.
“After two highly challenging years of category deceleration in the US and a reversal of momentum in China, we believe the company should explore accelerating its margin targets, rekindling its consumer-demand framework, or selling China into a JV,” the analyst suggested.The Board’s Duty
Some investors might be skeptical about the board feeling obligated to create an accelerated plan, especially given the 80 percent control of stock of the Hershey Trust. However, the analyst believes the board takes its fiduciary duty very seriously.

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Hershey Should Be Ashamed of Itself

Aug 30, 2016 | The Street

By Brian Sozzi

Boy oh boy, did Hershey's (HSY) top brass just shaft its shareholders or what?
The folks on the powerful Hershey Trust should be ashamed of themselves as they prepare to sun it up during the long holiday weekend. Not to take Mondelez's(MDLZ) interest as serious from the get-go was concerning from a pure shareholder-rights perspective.
While the trust, which owns 81% of the voting stock on Hershey, has an obligation to maintain Milton Hershey's ideals (such as supporting local under-privileged kids), it also has an obligation to maximize the value of the company -- and to its shareholders.
For Hershey CEO John Bilbrey to toss back to Mondelez CEO Irene Rosenfeld that its $125 a share bid would be the starting point for negotiations -- meaning the very fair $115 bid that Mondelez reportedly offered last week (up from $107 originally) was nowhere near acceptable -- smacks of an entity that may have forgotten it's a publicly traded company.
The outcome to this saga shouldn't really be surprising.
In 2002, the charitable trust that controls Hershey abandoned a $12.5 billion cash-and-stock offer from fellow candy-maker Wm. Wrigley Jr. Co. in the final stages of approval. Wrigley's offer represented a generous 42% premium over Hershey's stock price at the time, and Hershey's auction attracted a joint bid from Nestlé andCadbury Schweppes. Wrigley went on to be acquired by Mars for $23 billion in 2008 in a deal that was financed by legendary investor Warren Buffett. And Cadbury was acquired by Kraft Foods, which split off its confectionery business into Mondelez in 2012.
With the dividend-paying stock currently down 11%, there is an itch to buy on weakness. But that itch shouldn't be scratched, for several reasons.
For starters, Hershey could now be looked upon as being an even more shareholder-unfriendly entity than it has already long been perceived. In an environment where public company execs are turning more shareholder friendly in order to thwart activist investors and, ultimately, keep their jobs, Hershey's reluctance makes it stick out in a negative way. In short, its corporate governance isn't evolving with the times, which is a problem seeing as the stock is priced for perfection (perfection with dividend increases, executive management and corporate governance).
Second, Hershey has now put itself in an interesting predicament: It may be too big to be acquired by any one player. In saying $125 a share is the table stakes to start negotiations it likely means that Hershey wants someone to swoop in and pay north of $130 a share and make all sorts of concessions.
What other large food company has that kind of balance sheet, appetite to assume a huge amount of debt and desire to give Hershey complete control of the kingdom? The answer is nobody, not even Warren Buffett, who isn't going to pay $135 a share for Hershey. Moreover, anything north of $125 a share likely means any suitor is over-paying to gain access to a slow-growth candy company.
Finally, now that Hershey has quashed any hopes for a deal, the market will turn back to the operating performance of the company. That renewed scrutiny on fundamentals could weigh on Hershey even more as consumers continue to cut out sugar from their diets. It's an embedded trend that will never go away, bottom line.
That, as well as admitted execution missteps on product by management this year, will likely keep earnings growth subpar for the near term. Further, the company's latest efforts to get into snacking by acquiring Barkthins and Krave (meat snacks) are lower margin opportunities relative to candy bars.
Judging by the fundamentals and anti-shareholder trust, Hershey shares may need a larger re-rating than the one on display today. This entire development reaffirms that General Mills (GIS) is the one to own in the packaged-food space. The company is shareholder friendly, isn't afraid of doing big deals and has successfully evolved the product portfolio.

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Hershey: Buy On The Drop?

Aug 30, 2016 | Seeking Alpha

Introduction
This article is my 40th installment in a segment called "Buy on the Drop?" in which I choose a stock that recently experienced a large decrease in price and give a recommendation on whether investors should "Buy on the Drop" or not. The recommendations are Sell, Hold, Speculative Buy, Buy and Strong Buy. This is a recurring segment, so if you enjoy the article, "Follow" me to see more. You can read about my previous installment discussing Western Digital Corporation (NASDAQ:WDC) here.
Hershey Gets Creamed
Shares in The Hershey Company (NYSE:HSY) were down almost 12% after hours following Mondelēz's (NASDAQ:MDLZ) announcement that it is no longer pursuing a merger with Hershey. HSY had been flying high on expectations it would accept a bid from Mondelēz for a significant premium after Hersheyrejected the company's initial $107 per share offer.
As the chart shows, HSY has essentially given back all of the gains it had enjoyed recently from the merger speculation. In announcing the retraction of its interest in Hershey, Mondelēz stated the following:
Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement.
The key part of that quote is the reference to "recent shareholder developments," which is putting it lightly. The Hershey Trust, which owns 81% of The Hershey Company, recently came under heavy fire over improper trades, excessive spending by trustees, allowing board members to overstay their terms, which then finally led to a major overhaul in the trust's board membership. Evidently, this was too much for Mondelēz to deal with and they decided Hershey was not worth the trouble.
After the dust settles, investors that got into HSY hoping for some merger arbitrage opportunity and additional upside will have been punished hard, and regular HSY investors will be wondering whether now is a good time to buy. Well, is it a good time to buy HSY? As always, the answer depends on one's investing strategy and investing horizon. As I don't think HSY holds much noticeable short-term promise, the following analysis will focus on trends favorable for long-term investors.
What's appealing to long-term investors about HSY? Two things: cash flow and dividend growth. Hershey has been a consistent performer in both of these categories, and has gained a reputation as a solid, steady company. Since 1990, Hershey has increased its dividend every year aside from a slight hiccup in 2010, and has seen free cash flow gradually increase.
These are trademarks of a dividend growth stock, and Hershey's current upward trend in FCF and dividend growth don't seem to be in any danger in the near future whatsoever. Therefore, for long-term investors, HSY looks like a solid DG play at current prices.
Despite a slightly lofty forward P/E of around 20, I think those investors interested in HSY should pay little mind to the valuation as it will have a minimal effect on stock price and dividend growth in the coming years. Also, a point of slight concern is Hershey's fairly leveraged balance sheet with $250 million in cash and $3 billion in debt. However, in the current low yield environment, this is simply an example of Hershey taking advantage of low interest rates to fund returning capital to shareholders.
The company's free cash flow is still more than healthy enough to support both debt repayment and dividend payouts should interest rates rise significantly higher. That is not a likely scenario, but even in this worst case, Hershey will certainly be able to cope. Share buybacks, which have been the end use of debt, have also had a positive effect on HSY as the falling share count has boosted earnings per share and the stock price substantially over the past few years.
I frequently disapprove of share repurchases because I think they are a poor use of cash for a company with a growth problem. Gilead Sciences (NASDAQ:GILD) is the best example of this. However, while Gilead must compete with other large-cap pharmaceutical stocks which are earning cash hand over fist AND growing revenues, Hershey investors are content to watch the increasing dividend payments roll in and the company's free cash flow steadily rise.
With steady cash flow streams and a stable business model and financial standing, HSY appears ripe for a long-term investor's portfolio. With the valuation still a bit high and with little in the way of top line growth, I don't think investors with short-term horizons will gain much benefit from allocating capital for HSY shares. But for long-term investors, I rate The Hershey Company a Buy on the drop.

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Mondelez Abandons Bid To Create Snack-Candy Behemoth With Hershey Purchase

Aug 30, 2016 | Consumerist

By Ashlee Kieler

The residents of Hershey, PA, can breathe a sigh a relief today, as Mondelez — the owner of Nabisco and Cadbury — announced it would ditch its months-long bid to purchase the Hershey’s brand following several rebuffed offers by the chocolate giant.
Mondelez has thrown in the towel after Hershey rejected its latest offer, declaring there was “no actionable path forward” to buy the chocolate brand.
“As the world’s leading snacking company, we remain focused on successfully executing our strategy to deliver both sustainable top-line growth and significant margin expansion and are well-positioned to continue to deliver value to our shareholders,” Chairman and CEO Irene Rosenfeld said in astatement.
The Wall Street Journal reports that the timing just wasn’t right for the two companies to combine, as the Hershey Trust, which controls 81% of Hershey’s shareholder votes, is undergoing an overhaul of its own.
The Hershey Trust has historically resisted any sale offers.
“While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long-term,” Rosenfeld said, being careful not to shut the door on a future deal.
Mondelez first approached Hershey about a deal in June, offering $23 million. The company said it was “prepared to go to lengths” to win over America’s most famous chocolate brand, including pledges to protect jobs, relocate to Hershey, PA, and rename the whole company Hershey, according to a source.
Hershey, however, wasn’t feeling the love, and outright rejected the offer. Mondelez came back with a $25 billion bid. But again it was rebuffed.
Mondelez reportedly offered a final, unspecified bid last week, that was also rejected.

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Mondelez moves on from Hershey

Aug 30, 2016 | BakingBusiness.com

By Monica Watrous

Mondelez International, Inc. announced on Aug. 29 it has ended discussions with the Hershey Co. regarding a potential merger. Moving forward, the maker of Oreo cookies and Ritz crackers said it will continue to execute its plans to deliver sustainable growth and shareholder value.
As the world’s leading snacking company, we remain focused on successfully executing our strategy to deliver both sustainable top-line growth and significant margin expansion and are well-positioned to continue to deliver value to our shareholders,” said Irene Rosenfeld, chairman and chief executive officer of Mondelez International. “Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands.
“Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement.”
Mondelez first approached Hershey with a takeover bid in June, offering the Hershey, Pa., chocolate company $107 a share in a transaction valued at more than $25 billion, including the assumption of debt.
After receiving input from the company management and outside financial and legal advisers, Hershey’s board of directors unanimously rejected the expressions of interest “and determined that it provided no basis for further discussion between Mondelez and the company.”
“The company’s board of directors and management team are committed to enhancing value for all stockholders in accordance with the company’s strategic plan,” Hershey said at the time of the offer.
The deal hinged largely on the Hershey Trust, which controls 80% of the company’s stock and has opposed selling the company in the past.
“While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term,” Ms. Rosenfeld said.
Shares of the Hershey Co. tumbled more than 11% in after-hours trading Aug. 29 in response to news Mondelez had moved on from pursuing a deal.

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Mondelez abandons Hershey pursuit

Aug 30, 2016 | Just Food

By Katy Askew

Mondelez International has ended discussions with Hershey over a potential acquisition, the Cadbury owner has announced.
At the end of June, Hershey's board unanimously rejected a US$107-per-share bid from Mondelez that valued the Kisses maker at approximately $22.83bn.
At the time, the Hershey board insisted the offer did not warrant further discussions with Mondelez. However, governance issues at The Hershey Trust – which controls the majority of Hershey voting stock – were thought to provide Mondelez with a potential way to continue its takeover pursuit and discussions remained ongoing.
The Wall Street Journal reported yesterday Hershey had turned down a second bid from Mondelez last week.
Speaking yesterday, Mondelez CEO Irene Rosenfeld confirmed further negotiations have failed to lead to an agreement but the company did not state whether it had made a second offer. "Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands. Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement," she explained.
Rosenfeld insisted Mondelez remains focused on executing its strategy to deliver "sustainable top-line growth" and "significant margin expansion". She continued: "While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term."
MainFirst analyst Alain Oberhuber believed there were two sticking points for the deal: price and the reorganisation of the Hershey board. "Hershey would only entertain a starting bid of $125 a share. Mondelez made an offer of $115 a share after ... a first bid of $107 from this June," Oberhuber noted. "The second point of the deal break was the revamp of Hershey's board. An upheaval would have made it difficult for Mondelez to gauge the trust's willingness to agree to any deal."

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Hershey: Bye, Bye Mondelez. Bye, Bye Takeover Premium

Aug 30, 2016 | Barron's

By Ben Levisohn

UBS analysts Steven Strycula and Zachary Ringer see shares of Hershey (HSY) fairly valued at $100 now that merger talks with Mondelez International (MDLZ) have ended. They explain why:
After Monday’s market close Mondelez announced it has ended follow-on acquisition talks with Hershey. According to the WSJ, a misalignment in valuation considerations (HSY wanting ≥ $125/share) and further board turnover at The Hershey Trust Co. were complicating factors in reaching an agreement. Monday’s news comes shortly after Hershey rejected a $115/sh. offer (implies ~16x HSY ‘16E EBITDA / 17.8x ’16E EBITDA excl. Kit Kat/Rolo license). Note Mars acquired Wrigley for 18x EBITDA in ‘08.
What does this mean for Hershey shares? An unfavorable de-rating Hershey shares are trading down in Monday’s after-hours ($98-99 per share). With M&A discussions now over, Hershey fundamentals come back into focus—which are beginning to look like sluggish revenue headwinds impacting the rest of US Packaged Food. Further, we still do not view Hershey’s full-year 2016 organic sales guidance of +1.5% as conservative (implies N. America sales can reaccelerate to +1.5-2% in 2H16 from -1.5% in 1H16) and therefore, we do not believe HSY deserves to presently trade at a valuation premium to US Food. As such we are adjusting our target P/E to 22.5x from ~24x (in line w/Group at 22.5x) and target EV/EBITDA to 13.5x from ~14x (in line w/Group at 13.5x) but are leaving CY16E and CY17E EPS unchanged. The net impact of these changes reduces our price target to $100 from $107. Neutral rated.
Boy, that takeover premium disappeared quickly: Shares of Hershey have dropped 11% to $99.68 at 10:58 a.m. today, putting it right near the UBS price target. Mondelez International has gained 4% to $44.74.

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Is Hershey (HSY) Too Difficult to Buy? BloombergTV Weighs In

Aug 30, 2016 | The Street

By Amanda Schiavo

Shares of Hershey (HSY) are tumbling by 10.49% to $99.95 on Tuesday morning, after Oreo maker Mondelez (MDLZ) announced last night that it has abandoned it quest to acquire the chocolate maker.
The maker of Hershey Kisses and Reese's Peanut Butter Cups refused Mondelez's most recent takeover offer. The Hershey Trust, which controls the majority of Hershey's shareholder votes, is in the middle of a board overhaul amid investigations by state regulators.
It doesn't appear that Hershey is willing to make any kind of deal until the board of the trust is rearranged, Bloomberg News reporter Craig Giammona toldBloombergTV's Vonnie Quinn on "Bloomberg Markets."
It doesn't appear that Hershey is willing to make any kind of deal until the board of the trust is rearranged, Bloomberg News reporter Craig Giammona toldBloombergTV's Vonnie Quinn on "Bloomberg Markets."
"The trust is this entity, this $12 billion charity that controls the company [with] 80% of the voting rights. In the past they've been a barrier to a deal. Right now there is a lot of turmoil there, the board is in flux. It kind of sounds like Hershey is saying we're not going to make a move until at least 2017, when that board gets in place," Giammona said.
Bloomberg's Mark Barton joined the conversation, asking if this confirms Hershey's reputation as "the company that can't be bought."
"It does," Giammona said. "I think people are going to look at this and remember what happened a few years back with Nestle (NSRGY), Wrigley, and Cadbury. So once again, Hershey's been an attractive company to people over the years, but there's this huge barrier dealing with the Hershey Trust."
All of the turmoil with the trust and Mondelez backing out of its pursuit gives Giammona the sense that others will be reluctant to step up and make an offer for Hershey.
"You have to believe that this would dissuade other bidders from just getting involved in what is a very cumbersome process," he said.
Hershey could be dealing with another issue as consumers tend to move away from the sugary snacks in favor of more health conscience options. Vonnie Quinn questioned if this trend would make Hershey realize it would be in its best interest to be acquired.
"You would think. I mean Hershey has taken steps to diversify their portfolio. They made a big push into beef jerky, they've tried to go more premium. You're right people are sort of buying less Hershey Bars, less Reese's Cups, trying to eat healthy," Giammona said. "That's kind of why Hersey is where they are."
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate HERSHEY CO as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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Mondelez Drops Bid for Hershey

Aug 30, 2016 | FoodProcessing.com

By Lauren R. Hartman

Mondelez International, Inc., Deerfield, Ill., said Aug. 29 it has ended discussions with the Hershey Co. regarding a potential merger after the chocolatier rebuffed its latest acquisition offer, the second one since June, putting an end to a monthslong takeover campaign that would have created the world’s largest candy company. The company indicated it would be difficult to strike a deal before next year because of shifting dynamics at its controlling shareholder, the Hershey Trust Co., according to a report in the Wall Street Journal.
"As the world's leading snacking company, we remain focused on successfully executing our strategy to deliver both sustainable top-line growth and significant margin expansion and are well-positioned to continue to deliver value to our shareholders," said Mondelez chairman and CEO Irene Rosenfeld. "Our proposal to acquire Hershey reflected our conviction that combining our two iconic American companies would create an industry leader with global scale in snacking and confectionery and a strong portfolio of complementary brands. Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement. While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term," Rosenfeld said.
Mondelez initially approached the takeover bid with Hershey in June, offering the Hershey, Pa., chocolate company $107 a share in a transaction valued at more than $25 billion, including the assumption of debt. After receiving input from the company management and outside financial and legal advisers, Hershey’s board of directors unanimously rejected the expressions of interest, determining that it "provided no basis for further discussion between Mondelez and the company."
The deal was largely hinged on the Hershey Trust, which controls 80 percent of the company’s stock and which has opposed selling the company in the past.
Moving forward, the maker of Oreo cookies and Ritz crackers said it will continue to execute its plans to deliver sustainable growth and shareholder value. Analysts say this likely reinforces the notion that Hershey is unattainable as an acquisition target in light of its majority ownership by a trust that for years has been reluctant to sell.

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Mondelez: What’s Next After Kissing Off Hershey?

Aug 30, 2016 | Barron's

By Johanna Bennett

Now that Mondelez (MDLZ) has ended merger talks withHershey (HSY), Morgan Stanley analysts Matthew Grainger, Pamela Kaufman and John Colantuoni see the snack food giant renewing its focus on its standalone growth prospects.
What does that mean for the stock? Up 3.6% today to a recent $434.60, Grainger and his team see Mondelez shares climbing another 12% to $50. As they write:
With deal off the table, MDLZ reverts back to an attractive base case outlook: MDLZ’s decision to end talks with HSY will not completely remove the lingering questions surrounding its reasons for pursuing the acquisition, including whether its interest was purely strategic in nature or part of a larger discussion regarding the company’s direction (e.g., to either catalyze discussions with potential acquirers or indicate an increased desire to remain independent over time). However, given our concerns about the potential financial merits of a HSY acquisition, which on our analysis would have been essentially EPS neutral at $115/share, we view this development as a net positive which should refocus investor attention on the company’s compelling category footprint, peer-leading margin expansion, and strategic potential as a standalone company. Ultimately, with this overhang removed, we see potential for the stock to retrace recent weakness and trade closer toward our $50 PT (implying 23x 2017e P/E).
This is hardly the first time someone has touted Mondelez as a standalone story.
Activist hedge fund investor Bill Ackman claimed he still had faith in Mondelez even as he sold 20 million shares back in March, just eight months after his Pershing Square Capital Management first disclosed taking a major stake in the company.
At the time, there was much speculation that Mondelez was a takeout target as Ackman reportedly wanted the company to either cut costs and lift sales or sell to a rival. But as Barron’s argued back then, Mondelez is more than a takeout target. Efforts have been long underway to restore profit and sales with the company cutting costs, jettisoning under-performing brands and investing in more profitable ones.

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Why Abercrombie & Fitch Co. (ANF), Hershey Co (HSY) and Newmont Mining Corp (NEM) Are 3 of Today’s Worst Stocks

Aug 30, 2016 | InvestorPlace

By James Brumley

Hershey Co (HSY)
After most investors were convinced it was a done deal, food giant Mondelez International Inc (NASDAQ:MDLZ) dropped what was becoming a contentious bid for well-known candy name Hershey. MDLZ shares, largely relieved the frustrating matter is now in the past, went up nearly 4% on the news. HSY, however, fell nearly 11% as investors were shocked the buyout didn’t pan out.
It’s not a simple matter of playing too hard to get. The Hershey Trust owns the majority of HSY voting shares. It has its own responsibilities, and is not only in the midst of a board overhaul, but it is also currently under investigation by the state of Pennsylvania. It may not be willing or able to take on another distraction right now that could prevent it from giving the matter its due focus.10 Stocks Caught in the Trump-Clinton Election War
The pullback puts HSY shares right at the value-driven target price of $100 set by UBS now that the acquisition isn’t going to happen.

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US close: Stocks fall as traders look ahead to non-farm payrolls report

Aug 30, 2016 | Sharecast

By Renae Dyer

Hershey shares tumbled after Mondelez International said late on Monday it has ended its bid to buy the chocolate maker.

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Why Mondelez International Inc (MDLZ), Potash Corporation of Saskatchewan (USA) (POT) and United Continental Holdings Inc (UAL) Are 3 of Today’s Best Stocks

Aug 30, 2016 | InvestorPlace

By Todd Shriber

Mondelez International Inc (MDLZ)
Shares of Mondelez International Inc — the maker of Oreo cookies among other famous snack brands — surged 4% on heavy volume after the company said it is dropping its bid to acquire Hershey Co(NYSE:HSY).
MDLZ announced that it is terminating its effort to acquire Hershey after the close of U.S. markets Monday, news that sent shares of Pennsylvania-based Hershey tumbling today by 10.8% on volume that was more than six times the daily average.
The MDLZ effort to acquire Hershey faced staunch opposition from the Hershey Trust, which owns 34% of the company’s shares and controls a significant majority of the voting rights. The crumbled merger with Mondelez leaves some market observers believing Hershey simply has no interest in being acquired.

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Hershey: Back in Play

Aug 30, 2016 | Seeking Alpha

By Drew Allen

Eight weeks ago, Hershey (NYSE:HSY) shareholders got a jolt when it was suddenly announced that Mondelez (NASDAQ:MDLZ) was pursuing a bid for the Hershey Company. While the specifics weren't immediately known, the price immediately jumped to nearly $120 per share from the mid $90s. Shareholders immediately received three years worth of capital gains in one day, and when the speculative dust settled, it was revealed that Hershey had received a bid of part cash and part stock at $107 per share. However, the price did not come back down to Earth as there was speculation that a better price was forthcoming, and the stock continued to trade well over $100. Today, however, the wait was ended as Mondelez retracted their bid. This is a welcome announcement, as the uncertainty had left both long term shareholders and new prospective shareholders in a bind. Unnecessary uncertainty is the enemy of prudent investment, so with this speculation now ended, is Hershey worth looking at?
The Acquirer
For long term shareholders, if the deal had been completed and Mondelez had acquired Hershey, the company would have been in worse hands than it is currently. Their CEO publicly made a few poor decisions when they ran Kraft, and even earned a public rebuke from Buffett back in 2010. Further, their decision on how exactly to split Kraft up in 2012 seems to have been poorly thought out, and without a rescue from Buffett of the new Kraft Company, there would have been little to show for either firm from the split. The firm seems to need to stay busy, as the management talent to deliver solid returns does not seem to be there. Mondelez consistently shows poor return on equity, as it has been above 10% only once in the past four years since the spinoff, and has been below 8% twice. Hershey has performed much better on this metric, and has delivered ROE consistently over 50%. Therefore, a more profitable firm would have been absorbed by the relatively weaker firm in this instance. From this perspective, there are multiple other firms I would rather have acquired Hershey when looking at management talent.
It is not totally fair though to say that an acquisition would have been completely negative for Hershey. Hershey has little presence overseas, and its foray into the Chinese market with the purchase of Shanghai Golden monkey led to hundreds of millions being written off. Mondelez is an international firm with a global presence, and could finally be the catalyst needed to significantly expand Hershey overseas. There are, however, firms like Nestle or even Pepsi that could be better suited to this. It likely was not worth the new management team to achieve this objective.
Price Volatility
Next, new shareholders had a conundrum to consider as well. As with long term shareholders, they also had to consider that they were buying a company that could soon have been part of an inferior corporation. Hershey, however, is an excellent firm with a great portfolio of brands, and those brands sell products with fairly reliable income streams. This makes Hershey attractive for someone looking for consistent income. However, at the speculative acquisition price levels, the valuation was such that a new position would not have been warranted. Hershey is projecting adjusted EPS of $4.26 this year, and seeing as the final numbers have been below projections over the past couple of years, will likely deliver closer to $4.00 in EPS. With some certainty, the valuation may come back down to closer to 20-25x earnings, as the price is off 12% tonight in after hours trading. Buying shares of Hershey previously also meant buying into the price uncertainty; you could purchase at $110, which was an inferior valuation of nearly 30x earnings and face subpar returns as the price either stagnated in the future or crashed soon. You could always have averaged down, but at this point you were speculating on price movement. That price movement now looks to be large, considering the aforementioned after hours price drop.
Hershey as an investment now
Even while the speculation about the announcement continued, Hershey kept operating as a business. It kept making Reese's pieces, Hershey bars and other candy's, and released solid earnings. In the midst of all this, the firm even managed to bump up its dividend.
When Hershey initially popped up after the Mondelez announcement, I liquidated my shares and have held the cash thus far. It was something I came to regret, as it was a SWAN stock that one could reasonably count on for income. However, the valuation after the announcement and the prospective volatility made jumping back into the stock cost prohibitive. The stock had settled around 27-28x projected earnings, which is above the level I typically would want to start an investment. With the speculation over, Hershey now looks to be headed towards a more reasonable valuation. It will probably end up around 22-25x earnings, which while high, is in line with most other consumer stocks. This is a more fair price to pay, and thus, I will likely buy new shares once new cash becomes available soon (The proceeds from the first sale are sitting in my stock-market downturn fund and won't be touched). However, the valuation is still a bit elevated, and I will average back in over the next few months as the price will likely continue to drift back down towards $90.
Conclusion
When Mondelez announced they were looking to buy Hershey, it created a speculative environment that was prohibitive to long term investors. There was risk of a drop in price as it was elevated by musings about a better offer coming, and the valuation approached unappealing levels. However, with the bid off the table now, clarity has been delivered again to the picture. Hershey will still be overvalued after the price drop tomorrow, but look for the price to continue to fall lower and average in over the next few months. This is an opportunity to re-add an excellent firm to your portfolio if you sold on the initial announcement, and a good opportunity to add Hershey for the first time as well.

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Jim Cramer's 'Mad Money' Recap: The Urge to Merge Rules Wall Street

Aug 30, 2016 | The Street

By Scott Rutt

"We have too much of pretty much everything in this market," Jim Cramer told hisMad Money viewers Tuesday. "That's why the urge to merge is growing on Wall Street."
And that's why shares of Hershey (HSY) plunged after Mondelez (MDLZ) walked away from its bid for the company. In the food business, growth is hard to come by, which is why getting a takeover bid and then losing it matters a great deal. Companies would much rather merge than fight with each other.

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'Hershey (HSY) Seems Too Resistant Against Any Kind Of An Acquisition,' CNBC's Najarian Says

Aug 30, 2016 | The Street

By Giovanni Bruno

Shares of Hershey (HSY) were tanking 11.2% to $99.16 on Tuesday afternoon, as Mondelez (MDLZ) ends its pursuit of acquiring the Hershey, PA-based chocolate manufacturer.
In light of the stock's decline today CNBC contributor Pete Najarian, co-founder ofNajarian Family and Advisors Office, commented on the reports of the failed acquisition by Mondelez on this afternoon's "Fast Money Halftime Report."
"They seem too resistant against any kind of an acquisition. When you go back to June 9, we had 10,000 of the July $100 calls that were bought; those went from 75 cents to $17 in value," Najarian explained.
The trade is indicative of people targeting Hershey as a probable acquisition target, and thinking that a legitimate buyer had surfaced. There was, and that company was Mondelez.
"But, nobody knew the answer that Hershey was going to say see you later," Najarian said.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate HERSHEY CO as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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Whither Mondelez After Hershey Bid Fails?

Aug 31, 2016 | Media Post

By Thom Forbes

Mondelez, which would not sweeten its takeover bid enough to suit Hershey’s taste, now may find itself turning into a tasty treat for another super-sized food company such as Kraft Heinz or PepsiCo, some observers say. Hershey, meanwhile, saw its share price plummet 11% in late trading Tuesday, a day after Mondelez announced that it was dropping its bid. It had risen recently on speculation that Mondelez would prevail.
“Known for Oreos, Triscuits and other household brands, [Mondelez] could have used the $23 billion Hershey merger to bulk up and ward off potential acquirers. But the company said Monday there was ‘no path forward’ to a deal and walked away from discussions,” reports Craig Giammona for Bloomberg. “The question now for CEO Irene Rosenfeld is if there are any other buyout candidates — and whether getting swallowed by a bigger food giant such as Kraft Heinz Co. is inevitable.”
“There really aren’t many obvious options,” Bloomberg Intelligence analyst Ken Shea tells Giammona. “Hershey was a unique opportunity. They were willing to do it because it was an obvious fit.”
But “Rosenfeld faced staunch opposition from the Hershey Trust, a $12 billion charity created by the company's founder a century ago. The trust owns 34% of the company's shares and controls about 80% of the vote,” points out Sarah Whitten for CNBC.
“Rosenfeld privately indicated to Hershey officials a willingness to raise the bid to $115 a share last week [from $107], according to a person familiar with the matter. Hershey responded that the starting point for discussions would need to be $125 a share,” Tess Stynes reports for MarketWatch.
Activist investors — particularly William Ackman’s Pershing Square Capital Management and Nelson Peltz’ Trian Fund Management — together own more than 10% of the company when you factor in options and forward contracts, are presumably happy about the development. They want costs cut and margins improved, Annie Gasparro points out in the Wall Street Journal. Investors were gleeful, too — Mondelez’ shares rose nearly 4% yesterday.
“The latest turn of events puts even more pressure on Mondelez management to produce results on the cost-cutting front,” Gasparro writes. “Ms. Rosenfeld has promised to expand the company’s operating margin to 17% to 18% by 2018. They hit 15% in the most recent quarter.”
Ackman, in fact, thought the whole Hershey deal was a distraction although Rosenfeld defended it through a spokesman as “motivated by our belief that a combination offered a unique opportunity to enhance the prospects of both companies,” Gasparro reports.
Barron’s Johanna Bennett cites a note by Morgan Stanley analysts Matthew Grainger, Pamela Kaufman and John Colantuoni in which they “view this development as a net positive” for Mondelez, saying that it “should refocus investor attention on the company’s compelling category footprint, peer-leading margin expansion, and strategic potential as a standalone company.”
Indeed, Bennett writes, “Mondelez is more than a takeout target. Efforts have been long underway to restore profit and sales with the company cutting costs, jettisoning under-performing brands and investing in more profitable ones.”
As for Hershey, it has 31.3% market share in the U.S. in the candy, mint, and gum category, and Daniel Jones, manager of Avaring Capital Advisors, LLC — revealing that he has no stake In the company — sees it as an attractive investment,
“Of course, shares may continue to fall but absent something really bad like terrible mismanagement or fraud, Hershey appears to offer relatively safe and attractive prospects without being bought out and always has the potential to soar again should Mondelez come back or another company offer to buy up the enterprise,” hewrites on Seeking Alpha.
Over on The Street, Bob O’Brien sees future mega-deals as inevitable given how hard it is out there in a marketplace increasingly saturated by the likes of farmers-market fruit, home-brewed Kombucha and pesticide-free veggies from the backyard garden.
“For the record, branded products companies are gasping for anything approaching organic growth. We, as a society, have officially reached the saturation point in our appetite for the stuff that's in our cupboards, whether it's dried pasta, aerosol cheese or condensed milk,” he writes.
“For growth, branded products companies have to acquire it. Roll up what's either a complementary operator or, even better, a competitor, and the CEO gets to tell investors, ‘See, I've achieved what nobody else in our industry is able to do: I've swollen the top line. Appreciably.’”
Burp.

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Why Mondelez Is Ending Its Pursuit of Hershey

Aug 30, 2016 | Investopedia

By Erik Voklman

In the latest of a lengthening series of unconsummated merger attempts this year, candy and snacks giant Mondelez (NASDAQ: MDLZ) has formally withdrawn from its pursuit of Hershey (NYSE: HSY).
In a tersely worded statement on the matter, Mondelez only said: "Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement."
According to an article in The Wall Street Journal, citing "people familiar with the matter," the decision was made following Hershey's rejection of a new, enhanced offer from the would-be acquirer amounting to $115 per share. Apparently Hershey insisted that the starting price for negotiations be $125.
In June, Mondelez made its first approach with a cash-and-stock bid of $107 per share, an offer that valued Hershey at roughly $23 billion.
Hershey hasn't yet commented on the Mondelez abandonment, which, after it was made public, sent the former company's share price down by 12% in after-hours trading.
The company has a somewhat unusual structure in that The Hershey Trust -- a charitable organization established by company founder Milton Hershey back in 1906 -- controls over 80% of its voting rights. At the moment, the Trust, whose primary charge is to operate The Milton Hershey School, a free boarding school for low income students, is in transition following several legal scrapes and controversies regarding its management. A settlement in the works with the state of Pennsylvania will apparently see three of its 10 trustees resign by the end of this year.
For years, the Trust has been resistant to a sale of Hershey, even when it has solicited buyers. That was the case in 2002, when it effectively tried to auction itself off. Gum maker Wm. Wrigley Jr. submitted the high bid at $12 billion, but Hershey ultimately (and dramatically) elected to cancel the auction. And in 2007, a potential sale to the U.K.'s Cadbury went nowhere. (Ironically, Cadbury now belongs to Mondelez.)
Perhaps Mondelez, discouraged by the heavy resistance to its pursuit, has decided to retreat, and lie in wait for the trust's board shift before launching a new bid. There's also an outside chance that another big name in the food industry -- Kraft Heinz has been mentioned as a possibility -- will step in a take a shot or two. But just now, Hershey seems like its usual reluctant self, and we shouldn't be surprised if it continues on its own into the foreseeable future.
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Mondelez plans next steps after Hershey rebuff

Aug 31, 2016 | Seeking Alpha

By Yoel Minkoff

Now that a takeover of Hershey is off the table, Mondelez (NASDAQ:MDLZ) and its chief executive have signaled that ongoing cost cutting will be the way to profitability.
Irene Rosenfeld has promised to expand the company’s operating margin to 17%-18% by 2018. They hit 15% in the most recent quarter.
Investors seemed to welcome the end of the months-long play by the Oreo maker, with Mondelez shares closing up 4% on Tuesday.

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Broadcast Coverage

Varney & Company

Aug 30, 2016 | FBN

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Rough transcript: stuart: i want to get back to hershey, okay? the deal with mondelez, not going to happen. and nicole, hershey is really paying the price, is it not liz: absolutely. you see the stock down 11 and a third%. moving to the lowest level since june 30th where hershey rejected the mondelez bid. hershey kisses, mondelez goodbye, get it, and basically the two of them together for this $23 billion deal would have made them the largest confectioner in the whole wide world. there's talk, insiders said, that the two ceo's got together and the dealwhich was at $107 a share, that mondelez was willing to boost up to 115 and the trust of hershey said no way, they wouldn't accept a penny less than $125 a share. they were nowhere near agreement on what the price would be. stuart: but you know hershey has always wanted to stay independent. their whole goal is to stay independent so they put a very, very unreachable price on any potential deal. they know it's not going to be accepted. they want to stay independent and they don't care that much what happens to the stock price, in my opinion. and nicole, thanks very much.

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Michaela

Aug 30, 2016 | HLN

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Rough transcript: the company that owns cadbury chocolate has dropped its $23 billion buyout bid for hershey. hershey's board rejected the offer back in june. but the companies kept talking. mondelez also owns brands like oreos and chips ahoy. had the deal gone through it would have created the world's largest candy company. shares of hershey tumbled 11% in after hours trading on that news.

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Squawk on the Street

Aug 30, 2016 | CNBC

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Rough transcript: >>> snack maker mondelez walking away from its take over bid from hershey. the maker of oreo cookies ending talks for the last few monthsnow of a potential acquisition, after a two month long campaign saying in a statement last night that it made the call after quote taking into account recent shareholder developments at hershey. we determined there's no actionable path forward towards an agreement. that combo would have created the world's largest candy maker. shares of hershey, down almost 11%, mondelez going the other way up 4% and a big part of the strategic rationale here guys was for mondelez, which is a big international company, sells a lot in europe and emergenting markets to get a bigger share of the U.S. candy market. but the back story here, that was an illusive statement. the shareholder concern >> it was in some ways. the trust itself that controls hershey is being reconstituted. a number of members of that trust have stepped down and new ones will be joining at the end of the year. that was certainly a complicating process here, and the trusts, 80% plus vote and 34% economic interest, has always been the key at hershey. it's not just getting through management and the board but actually dealing with the trust and that does seem to be where there was a good deal of miscommunication perhaps or lack of communication in speaking to people familiar with the discussions. it just seems that mondelez went in with one thought and perhaps was able to negotiate to a certain extent, with john bilbrey the ceo of hershey, but really not able to get anything done with the trust, particularly given the tumult of the members of that trust in terms of sone stepping off. one wonders though what they were thinking of to be frank. they had months of conversations between bilbrey and rosenfeld and they never apparently dealt with price until they made their 107 dollar a share offer, when was rejected soundly by the hershey board. they came back and said we may go to 115, bilbry said it would take 125 to even start to think about negotiation and they said it's not going to happen. there never seemed to be an appropriate structure or value they could figure out here. >> and judging by the market reaction the question now is what's next for both of those companies in an industry and a space that is challenged by changes in consumer tastes going towards more healthy, changing of ingredients. the market has judged mondelez at better at adapting -- >> and what about hersheys? what about their domestic prospects as a domestic chocolate maker? if you're a trustee of the hershey trust, you've got to be thinking about the ability of this company to continue to thrive, do you need to diversify? this would have given them that opportunity, they didn't take it clearly, what is hershey's future look like? >> they're going to have to prove that they can go it alone. they were never considered a likely m&a target because of these trust issues -- >> given all this. >> they have been slower than mondelez to see they can squeeze more out of margins. they're going to be under the microscope now when it comes to accelerating value creation. morgan stanley this morning down grated hershey's stock from 102, from 110. >> and as the rest of the industry gets bigger they do by comparison get smaller. and it's not just they're staying the same size. >> and no reeses oreos in the future. >>>

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Bloomberg Markets

Aug 30, 2016 | Bloom

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Rough transcript: shares of hershey taking a big hit. the stock down is sharply after mondelez walked away from a takeover attempt of the chocolate maker. hershey has been the subject of takeovers before this most recent reject comes after mondelez reportedly proposed to sweeten its offer to 115 dollars a share. so where does hershey go from here? lets bring in bloomberg reporter craig giamonna. mondelez will sweeten the deal at that point will hershey have a rethink? >> it doesn't seem like it. it does not seem like right now they want to do anything before the board of the hershey trust is reconstituted. so the trust is this entity, this 12 billion dollar charity that controls the company, 80% of the voting rights. in the past they have been a barrier to a deal. right now there's a lot of turmoil there the board is in flux. so it sounds like hershey is saying we will not make a move until at least 2017 when that board gets in place. >>> it does sound like there is a price though. 125 dollars could be it >> that's right, you know we want to start talking at 125. but even in that scenario, say the hershey board says we want to accept that offer of 125, then we have this issue of the trust. mondelez seeing this i guess reading the tea leaves says enough we're out of here we are going home they didn't want to further negotiate. >> does this confirm hershey's reputation as the company that cannot be bought. >> it does. i think people are going to look at this and remember what happened a few years back with nestle, wrigley, and cadbury. so once again, hershey's has been an attractive company to people over the years, but there is a huge barrier dealing with hershey's trust and the politics that go along with the pennsylvania attorney general being able to review the deal. i just think people will look at this and what happened to mondelez and think it is a very very difficult company to buy. mark: does this mean that other potential suitors might balk at the opportunity to pursue hershey? >> that is the sense we are getting. that people will look at this and say look at what happened to mondelez. they came in with a very nice offer and got caught up once again in the politics that surround hershey's. you have to think this will persuade other bidders from getting invovled in what's a very cumbersome process. vonnie: so there's definitely internal politics, but times are changing, it seems like the consumer is getting a little healthier or maybe avoiding sweetened things more. wouldn't it be in hershey's best interest to consider being bought? >> you would think. i mean hershey has taken steps to diversify their portofolio. they made a big push into beef jerky, they have tried to go more premium. because you're right, people are buying less hershey's bars, less reeses cups, trying to eat healthier. so that's kind of why hershey is where they are and why they've mentioned as a takeover target. i think mondelez said hey maybe this is an opportunity there's turmoil at the trust, maybe we can slip in there with a nice bid and get this thing done. but i just think with the way it unraveled, this is the company that's proving it is a very tough target. vonnie: where does the pennsylvania attorney general come into this? >> they have oversight because of the way this was set up. this goes all the way back to the beginning of the 1900s and milton hershey, the founder of the company, established this trust. the pennsylvania attorney general has the right to review any deal if they feel it would change the financing of the school. so the milton hershey school, a school for under privileged children, is funded by the trust. operated by the trust. and the trust gets a lot of its money from the chocolate company, sort of a convoluted thing. but if there is a feeling that a deal would affect that financing, the Pennsylvania attorney general has the right to get involved. so it's just another thing that hangs out there with this. >>> can it survive out there own its own? >>> hershey the company? they say they can, they've done a lot to diversify their portfolio but like i said they've struggled and thats why they've been a target.

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Varney & Company

Aug 30, 2016 | FBN

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Rough transcript: stuart: i'll start with hershey. my belief is scrapping the deal to buy hershey. investors not keen on that. it's down 11%. how about mondelez? they're up 3.5%. the market likes that.

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Squawk Alley

Aug 30, 2016 | CNBC

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Rough transcript: well mondelez walking away from a proposed takeover bid for hershey. the combination would have created the world's largest candymaker. shares of mondelez are up rather sharply and hershey is down very sharply. of course, one sometimes wonders why companies when engaging in merger talks don't deal with price first as opposed to leaving it on the back burner. that is often the way these things go. there were lots of potential obstacles to a deal getting done here. not least of which is, of course, the hershey trust, which controls more than 80% of the vote, controls the company and 34% of the economics of hershey. you need to deal with the trust if you have any hope of buying hershey. but in this case, it does appear that there was a miscommunication perhaps early on or at least a lack thereof, even though there were talks that went on between irene rosenfield the ceo of mondeleand and john bilbrey, the ceo of hershey. those talks went on for some months but didn't ever seem to get to, in a meaningful way, i guess, price. because when they finally talked price last week after $107 a share bid made by mondalez, soundly rejected by hershey's board a couple months back, maybe 115 we can go it? and mr. bilbrey said 125 is where you got to even start. well then they knew, there was no hope. and then they decided to walk away from this potential deal. again, it was a deal that was a difficult one at the least to get done, giving the trust's unwillingness to sort of engage the past, given what had been at least some lack of communication between the board of hershey and the trust in the past. that doesn't appear to have been as much the case as simply from the people i've spoken with, the inability of mondelez to get a straight answer from the trust as to what the number might be. again mr. bilbrey coming forward saying well it's 125 to even start a negotiation. that's not a number mondalez was willing to go with. they pointed out time and again the fact that any deal would actually see the kit kat license go back to nestle, that represents as much as 10% of EBIDTA by hershey and that they were not going to pay anywhere near the price they would have wanted to really be willing to sell. but it will be interesting to see this trust which in the midst of transformation right now. the Pennsylvania a.g., the former a.g., who just got booted from office, cuz she was found guilty, convicted, of a number of offenses, had changed the composition, chased a few members of the trust off. but they have to think of what their ultimate objective when it comes to owning and having significant position in and their most significant asset being a domestic chocolate maker is a world that some say needs to be, is more global. >> was 125 a number that proxy advisers drummed up from shareholders at what they'd be willing to sell at, or was that something you think was equivalent to a heisman? >> yeah. i don't know. 125, was not a number i heard from a lot of hershey investors out there, but they don't matter. the only investor that matters is the trust. and apparently it was not a number -- they didn't really fully ever engage is what i'm told. but certainly that was one way to say to your point, it's just not going to happen. no sweets for you.

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Bloomberg Markets

Aug 30, 2016 | Bloom

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Rough transcript: and then hershey down 11%. we reported yesterday that mondelez is no longer gonna be bidding for hershey. didn't think it would be possible due to some shareholder activity, so no merger there, and that hurts the stock.

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Fast Money Halftime Report

Aug 30, 2016 | CNBC

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Rough transcript: forget about mondelez and hershey. hershey, hershey by the way, on pace for its worst day in 14 years. >> they just do not, they seem to be very resistant of anybody, any kind of acqusition, but this is one of those names, scott, you go back to june 9th. we had 10,000 of the july 100 calls were bought. those went from 75 cents to $17 in value. so it gives you an idea. jon and i talking about it earlier an some of other trades from today. well this one absolutely magnificent in terms people were looking for ths name. people thought there was somebody out there, there was, it was mondelez. but nobody knew the answer that hershey was just gonna say see you later.

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Power Lunch

Aug 30, 2016 | CNBC

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Rough transcript: it is an ugly day for hershey investors after mondelez scapped its takeover bid for the chocolate giant. Hershey down more than 11%, that my friends its worst day in 14 years.

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Cavuto Coast to Coast

Aug 30, 2016 | FBN

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Rough transcript: check out shares of hershey, having a tough day, too, after it was revealed that its given up mondelez, which owns canbury cream eggs is no longer interested in buying hershey. so you can kiss that deal premium goodbye. the stock is suffering as a result.

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Bloomberg Markets

Aug 30, 2016 | Bloom

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Rough transcript: Mondelez shares are nicely higher, in fact on pace for the best day in 2 months after the company said it is no longer going after hershey as a 23 billion dollar acquisition. this following two months of unsuccessful or stalled takeover talks. but many are pleased with this, investors clearly with the stock higher, considering that hershey slow growth and was considered to possibly be a potential drag for mondelez.

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Countdown to the Closing Bell with Liza Claman

Aug 30, 2016 | FBN

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Rough transcript: mondelez has announced it is no longer looking to buy hershey after hershey turned down its $23 billion cash and stock bill, that takeover by the way would have created the world's largest candy company. shares of both snack companies, hershey down 10% mondelez up 3.5%.

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Bloomberg Markets

Aug 30, 2016 | Bloom

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Rough transcript: not quite positive but mondelez is having a fantastic day, its best day in 2 years. and yesterday on the close the stock had been down 4% on the year. now down less than half a percent on this stellar day. trading higher on the news that the company has abandoned its 23 billion dollar bid for hersheys after 2 months of stalled takeover talks. many are happy about this, clearly with the stock higher. many had thought that hershey was slowing growing and that it would really drag on mondelez. and again on this news the stock is down less than half a percent on the year so perhaps if investors remain enthusiastic about the fact that this bid for hersheys was dropped perhaps we'll see mondelez turn positive on the year in the days ahead.

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After the Bell

Aug 30, 2016 | FBN

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Rough transcript: no surprise on hershey. they were doing a flirtation with mondelez, maker of oreo cookies and cadbury cream eggs over at easter time. finally mondelez said enough is enough, no deal there. hershey thought itself was worth $125 per share. they just could really not come to terms on the proper valuation so you see hershey stock really getting slammed today.

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Mad Money

Aug 30, 2016 | CNBC

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Rough transcript: of course virtually every aisle of the supermarket. does campbell's soup need to be independent, does kelloggs stand alone? we know that mondelez has plenty of capital to buy another company in the group. i suspect now that it's given up on hershey, what was with hershey, i mean come on. if they kelogg can't get their act together why doesn't mondelez buy that organic company that is hobbled with county irregularities. believe me we haven't heard the end of the consolidation of the food group because the supermarket aisles are filled with companies that unlike hershey would rather merge than fight.

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Mad Money

Aug 31, 2016 | CNBC

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Rough transcript: that's why the urge to merge has become a major problem for this market. when that problem goes away, as it did today web food giant mondelez walked way from its bid to hershey, after they couldn't agree on a price. it cast a pull over the entire averages. a big reason why the dow sank, nasdaq claimed .8%. the intenses competition created by the sheer number of companies in business may be good for the consumer, good for you and me. we all benefit from corporations duking it out for our patronage. but at the same time, this competition is an anathema to profits which is why we see so many companies doing deals.

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