Mondelez backs out of bid to acquire Hershey

Mondelez International, Inc, the US-based global beverage and confectionery behemoth behind such names as Cadbury, among others said on Monday it was backing out of a $23bn bid to acquire US chocolate candy maker Hershey.

Hershey, which is controlled by a nonprofit trust set up by the founder, Milton Hershey turned down the cash-and-stock offer indicating that price discussions had to start at $125 a share. Mondelez had offered to pay $107 a share at the end of June, and raised the offer to $115 last week, all of which were spurned.

Mondelez said it made concessions, agreeing to maintain employment levels and moving the company’s headquarters to Hershey, Pennsylvania. It also agreed to keep the Hershey name all of which was rebuffed.

Mondelez said: “It determined that it provided no basis for further discussion between Modelez and the company.”

The combined company would have created the world’s biggest maker of confectionery, given it 18% of the global market share. It also would have given Mondelez a stronger footprint in the domestic US candy market. Hershey generated 90% of its revenues in North America last year, most of which came from the United States. While having a strong foot print in about 165 countries around world, Mondelez has suffered considerably in recent years from currency headwinds and slower economies outside the United States.

Mondelez chief executive Officer, Irene Rosenfeld said the board was “disappointed with the outcome” but had decided there was “no actionable path forward toward an agreement.”

“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,” she said in a statement.

Hershey, the smaller of the two companies reported net sales of $7.4bn in 2015, while Mondelez had $29.6bn in sales.

Hershey Trust Company, which controls 81% of the company’s stock, is chartered by the State of Pennsylvania, where the company has its headquarters. In the past, the trust has opposed sale of the company. However, the Attorney General of the State has pushed for a reform of the trust management, which includes a 10 year term for each board member, which would see three board members retire by the end of this year, and two more in 2017.

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