The deal, which would see the second and fifth largest confectionary companies come together, would create the world’s largest.
The board unanimously rejected the bid last week, and said there was no basis for further discussion. But, reported the Wall Street Journal, shares in the US confectionary icon jumped 17%, staying up even after the news broke that the bid had been rejected – which could indicate the markets anticipate there might be some life in the deal yet.
Obstacles to a takeover of Hershey do not come from the likely places – Mondelez doesn’t have its own presence in the US market, and Hershey has only a limited presence outside the US. Hershey already makes Cadburys chocolate in the US under a licensing deal with the giant. Its competitor Nestle, the New York Times says, faces bigger antitrust issues if it were to cosider a buyout of Hersheys.
The Hershey Trust, a charitable foundation, the primary beneficiary of which is a school for underprivileged children, has a history of rejecting bids. It first rejected a bid by chewing-gum maker Wrigley over a decade ago and then a joint bid from Nestle and what was then Cadbury Schweppes.
But, the trust could be becoming more amenable. This year several directors have resigned, and according to the Wall Street Times, a person familiar with the trust, which now includes some directors with Wall Street backgrounds, said it may now be more open to a deal.
But, the town of Hershey could be the sticking point. It has a real influence over corporate decisions, according to Reuters. Pennsylvania’s attorney general has the power to block deals and the law requires any charitable trust to consider, when selling an asset, the “special relationship of the asset and its economic impact as a principal business enterprise on the community”.
Many in the town have voiced concerns about the merger, despite offers from Mondelez to preserve jobs, keep the Hershey name and move its headquarters to the area, Reuters claimed.
Whether a renewed bid is successful or not seems dependent on whether the town of Hershey – in which street lights are topped by Hershey kisses – can part with a brand that goes right to its very core. Any potential buyer has a fight ahead.