Mondelez Explores Acquisition of Hershey

(Reuters) – Cadbury-parent Mondelez (NASDAQ:MDLZ) International is exploring the acquisition of chocolate maker Hershey. Bloomberg News reported on Monday, citing sources familiar with the matter, that this move could create one of the world's largest confectioners.

Shares of Hershey, with a market capitalization of about $35 billion, rose 17%, whereas Mondelez’s shares declined about 4% during morning trading.

Mondelez, valued at around $84 billion, has made a preliminary approach regarding a possible combination. However, Bloomberg indicated that discussions are in the early stages, and there is no certainty that they will result in a deal.

Both Mondelez and Hershey declined to comment.

The Hershey Trust Company, a charitable trust that benefits the Milton Hershey School, retains voting control over The Hershey Company (NYSE:HSY), making its approval essential for any deal.

This isn’t Mondelez’s first attempt to acquire Hershey. In 2016, the Oreo cookie and Cadbury chocolate maker abandoned its pursuit of Hershey after the company rejected a $23 billion takeover bid.

The confectionery industry and packaged food firms face pressures from rising costs, particularly cocoa prices. This forces companies to increase prices while also dealing with waning consumer demand due to these hikes, resulting in a surge in deal-making.

Earlier this year, candy giant Mars announced it would purchase Cheez-It maker Kellanova for nearly $36 billion, a deal that combined brands from M&M's and Snickers to Pringles and Pop-Tarts, marking the largest deal of the year thus far.

Last month, Hershey lowered its annual revenue and profit forecasts following a quarterly revenue dip to nearly $3 billion. Conversely, Mondelez reported nearly a 2% increase in sales, reaching $9.2 billion in the latest quarter.