Shares of US chocolate maker Hershey rose more than 10% following reports that Mondelez International, the parent company of UK-based Cadbury, has approached Hershey with a potential buyout offer, BBC reports.
The proposed merger could create a global snack food powerhouse with combined annual sales approaching $50 billion (£39.2 billion).
According to Bloomberg, discussions are still in the preliminary stages, and it is not certain that negotiations will result in a formal deal. Both Hershey and Mondelez declined to comment on the reports when contacted by BBC News.
This is not the first time Mondelez has sought to acquire Hershey. In 2016, the U.S. chocolate maker rejected a $23 billion takeover bid from Mondelez. One key obstacle to any acquisition is the Hershey Trust Company, a charitable trust that holds a controlling stake in the company. The trust has historically opposed efforts to sell the business, prioritizing its mission to support education and other charitable causes.
If a deal moves forward, the approval of the Hershey Trust will once again be a critical factor in the outcome. The trust has previously used its voting power to block acquisitions, underscoring the challenge Mondelez may face in attempting to finalize a deal.
A merger between Hershey and Mondelez would bring together some of the world’s most iconic snack and confectionery brands. Hershey is best known for its namesake chocolate bars, Reese’s Peanut Butter Cups, and Hershey’s Kisses, while Mondelez owns household names such as Cadbury, Oreo, Toblerone, and Ritz crackers.
Such a combination would create a formidable player in the packaged food and snack industry at a time when consumer demand for indulgent treats remains strong, despite economic pressures. Analysts note that consolidation in the food sector has been accelerating as companies seek to improve growth and efficiency.
For instance, in August 2024, Mars, another major confectionery player, acquired Pringles and Pop-Tarts maker Kellanova for nearly $36 billion. Analysts see these types of deals as efforts to diversify revenue streams and enter new product categories.
The packaged food industry has faced headwinds in recent years as inflation, supply chain disruptions, and rising commodity prices have put pressure on profit margins. Chocolate companies, in particular, have struggled to manage soaring cocoa prices, which they have had to pass on to consumers.
Hershey has not been immune to these challenges. Last month, the company lowered its revenue and profit forecasts, citing high cocoa costs as the “biggest source of inflation” for the business, according to Chief Financial Officer Steve Voskuil.
The broader industry has seen similar trends, with other major food producers also feeling the squeeze. Kraft Heinz, for example, recently reduced its annual sales and profit outlook as consumers cut back on purchases following several rounds of price increases.
News of the possible Mondelez-Hershey merger sparked investor interest, sending Hershey’s share price up by more than 10%. Mergers and acquisitions in the packaged food sector have increased in recent years, and some analysts predict this trend could continue.
Previous forecasts had suggested that corporate deal-making might accelerate under the administration of former US President Donald Trump, who was viewed as more business-friendly. Although the regulatory environment has since evolved, the appetite for large-scale mergers in the consumer goods sector remains strong.
If successful, the Hershey-Mondelez deal would mark one of the largest transactions in the confectionery industry, adding to the wave of consolidation already reshaping the packaged food market.
