Snack-food giant Mondelez International Inc.’s potential takeover of chocolate maker Hershey Co. would rank as the year’s top M&A deal.
Chicago-based Mondelez, the maker of Oreo, Ritz, Wheat Thins, Cadbury and more, has approached Hershey about a potential buyout, Bloomberg reported early this week. The overture is still in the preliminary stages and there’s no guarantee that the conversation will lead to a deal.
If the deal goes through, it would create a food giant with combined sales of almost $50 billion.
This is not the first time Mondelez has sought a deal for Hershey Co. In 2016, it walked away from discussions about a potential takeover after seeing a $23 billion bid rejected by the chocolate maker.
Any deal would require the backing of Hershey Trust Co., which owns almost all of Hershey Co.’s Class B stock, giving it roughly 80% of the voting power at the company. The trust has slowly been selling some of its Hershey Co. shares in an effort to diversify its holdings.
Mondelez said it doesn’t comment on “market rumors and speculation.” Hershey also issued a similar statement.
The packaged-food industry has been grappling with declining volumes, slowing growth and a weakening global consumer. Companies are looking to innovation and new markets to bolster sales as shoppers start to push back on price hikes and become more health-conscious — a trend that could lead to consolidation.
Founded in the late 19th century, Hershey Co. is known for its chocolate and candy brands, including Hershey’s Kisses, Reese’s Peanut Butter Cups and PayDay. It expanded its sweets portfolio in November with an acquisition of Sour Strips.
The company, led by Chief Executive Officer Michele Buck, has been hit by record high cocoa prices, which have come down from their peaks but remain significantly elevated compared with prior years. Sugar costs are also high. Last month, Hershey Co. cut its outlook for net sales growth and earnings, as inflation-weary consumers watch their budgets.
The volume of mergers and acquisitions globally is already up 18% year over year to $3.1 trillion as deal-making makes a slow recovery from last year’s lows, according to data compiled by Bloomberg. A takeover of Hershey, which was valued at $44 billion including debt at Monday’s close, would surpass candy bar maker Mars Inc.’s planned purchase of cereal producer Kellanova as the biggest acquisition of the year if they reach a final agreement.
There have already been more megadeals this year than 2023, with marquee transactions in the software, energy and media industries. Consumer transactions have accounted for a larger than usual proportion of the pie, approaching almost 20% of total deal volumes this year, according to data compiled by Bloomberg.