Hershey Co. Shares Surge

Hershey Co. shares surged over 14% in early Monday trading after Bloomberg reported that Mondelez International Inc. is exploring an acquisition of the chocolate maker.

Potential Deal

The potential acquisition would form a combined food giant with nearly $50 billion in annual sales. Mondelez, known for Oreos and Ritz crackers, reportedly made a preliminary approach about a possible combination. However, the discussions are said to be in early stages, and there's no certainty a deal will be reached.

This isn't the first time Mondelez has expressed interest in Hershey, as it previously attempted a $23 billion takeover in 2016, which was rejected by Hershey.

Approval Requirements

A takeover would likely require approval from the Hershey Trust Co., which holds 80% of the company's voting power. Despite this, deliberations remain in early stages, and the likelihood of a deal is uncertain.

The trust has been gradually selling some of its Hershey shares to diversify its holdings.

Market Context

This potential acquisition comes at a time when the packaged food sector faces challenges such as slowing growth and rising ingredient costs. Hershey, famous for Reese’s and Kisses, has been impacted by high cocoa and sugar prices and recently adjusted its sales and earnings outlook due to inflationary pressures.

Mondelez aims to expand its chocolate and snack businesses, demonstrating the financial capacity for mergers.

If the deal goes through, it would surpass Mars Inc.’s recent $36 billion acquisition of Kellanova, making it one of the year's largest transactions.