Mondelez International Inc., the snacks and sweets company, is exploring an acquisition of iconic US chocolate maker Hershey Co., in a potential deal that would create a food giant with combined sales of almost $50 billion, according to people familiar with the matter.
Chicago-based Mondelez has made a preliminary approach about a possible combination, said the people, who asked not to be identified because discussions are private. Mondelez had a market capitalization of roughly $84 billion, while Hershey was valued at $35 billion at the end of last week.
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.
Shares in Hershey Co. were down about 6% in New York trading this year through Friday while the company has a value of roughly $40 billion including debt. Deliberations are in the early stages and there’s no certainty that discussions will lead to a deal, sources said.
Mondelez makes Ritz crackers and Oreo cookies as well as Toblerone chocolate bars. The company is “receptive to acquisitions” and has the debt capacity for M&A as it looks to expand its chocolate, biscuits and baked snacks divisions, analysts at Bloomberg Intelligence wrote in September. The company in October reported third-quarter earnings that beat estimates.
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.
