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Mondelez, the maker of Oreo and Cadbury, is reportedly exploring an offer to buy rival Hershey Company to potentially create one of the world’s largest candy companies.
The preliminary discussions between the companies, reported by Bloomberg, sent shares of Hershey (HSY) nearly 15% higher in midday trading Monday. Mondelez, the larger of the two companies, recently approached Hershey, although Bloomberg noted there is “no certainty that discussions will lead to a deal.”
Mondelez said it doesn’t comment on “market rumors and speculation.” Hershey also issued a similar statement.
A potential combination would unite two of the most well-known confectionary companies that also make grocery store staples. In addition to owning Oreo and Cadbury, Mondelez owns Chips Ahoy, Ritz Crackers, Wheat Thins and Sour Patch Kids. Hershey has KitKats, Reese’s, Jolly Rancher and SkinnyPop Popcorn, in addition to its namesake chocolate.
Health-conscious customers have cut back on snacking, purchasing fewer unhealthy foods and keeping a closer eye on their spending as inflation remains high. That has led to major dealmaking, including Mars recently buying Kellanova in a nearly $30 billion deal.
Prior to the report, Hershey’s stock was down about 10% for the year, making it an attractive acquisition target, according to Randal Kenworthy, consumer and industrial product lead at consulting firm West Monroe.
“Hershey brings strong operational capabilities and great brands, making this a compelling opportunity for Mondelez,” Kenworthy told . In addition to enhancing Mondelez’s purchasing power in the increasingly expensive cocoa market, the combination would also “strengthen Mondelez’s access to the US market, leveraging Hershey’s robust brand presence in North America, while creating avenues for expansion into Europe.”
It’s also not the first time Mondelez has approached Hershey. In 2016, Hershey rebuffed a $23 billion bid from Mondelez. All offers have to be approved by the Hershey Trust, the shareholder that owns the vast majority of the candy giant’s votes and has been reluctant to sell the iconic company.
