Blog Coverage Mondelez Abandons Hershey Acquisition Bid

LONDON, UK / ACCESSWIRE / August 31, 2016 / Active Wall St. blog coverage looks at the headline from Mondelez International, Inc. (NASDAQ: MDLZ). For nearly two months, it was likely that the world would witness the merger of two American confectionary giants to form the world’s largest confectionery company. However, the dreams came crashing when Mondelez International, Inc. in its press release on Monday, August 29, 2016, informed Wall Street that is was no longer pursuing its bid to acquire The Hershey Company (NYSE: HSY). Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Briefing and Reaction

Earlier this June, the makers of Oreo had put forward a bid of more than $23 billion for the potential takeover of Hershey. In its offer, Mondelez was to pay $107 per share in cash and stock for every Hershey’s share with an addition of 10% premium. However, the Hershey’s board then had immediately turned down the cash and stock offer and stated that “that it provided no basis for further discussion between Mondelez and the company.”

Mondelez’s CEO, Irene B. Rosenfeld, expressed her disappointment with the outcome of the talks with Hershey and stated that there was “no actionable path forward toward an agreement”. In her statement she said:

“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.”

Deal Breaking Trust

It is reckoned that the deal was abandoned after the Hershey Trust, asked the Cadbury owner to end its proposed deal with Wrigley. The Hershey Trust, established by Milton Hershey and his wife Catherine in 1905, owns 34% of the company’s common stock and yet controls 81% of the voting power. The Trust has been at the helm in turning down various offers of takeover and mergers in the past. It is regarded as the thorn when Wm. Wrigley Jr. Company offered to takeover Hershey in 2002, and was again in the line of fire when Hershey wanted to buy Cadbury eight years later but was turned down by the trust.

Meanwhile, had the deal gone through, Hershey, which generated 90% of its revenue from North America, mostly from chocolate sales, would have to give up its U.S. license for manufacturing Kit-Kat, a product of Nestle (Mondelez’s global competitor).

Stock Performance

Mondelez International’s shares ended 3.95% higher finishing the trading session at $44.74 on August 30, 2016. The stock recorded a total volume of 14.1 million shares, which was higher than its 3 months average volume of 7.36 million shares. In the last one month and the previous six months, the company’s share price has gained 2.90% and 9.46%, respectively. Currently, the stock traded at a P/E ratio of 9.63.

Following news of the failed takeover bid, The Hershey Company’s share price, on the other hand, saw a correction of 10.76% at the end of the trading session on Tuesday, 30 August, 2016, finishing the day at $99.65. The stock traded at a total volume of 7.95 million shares, which was higher than its 3 months average volume of 1.78 million shares. It is worth noting that the company’s shares were trading near their all-time high for nearly two months.

For the last month Hershey’s stock lost 9.65%, but it has advanced 9.29% in the last six months and 13.70% year-to-date.

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