Hershey Company (HSY) Stock Sells off Sharply After Mondelez Abandons Pursuit

Shares of The Hershey Company (HSY) were trading down -12.26 or -10.98 percent to $99.41 in Tuesday’s premarket after news late yesterday that Mondelez International Inc. (MDLZ) had abandoned its plans to acquire Hershey Co. Hershey Co. stock closed at $111.67 per share, up +0.79 or +0.71 percent in Monday’s regular trading session.

Stock Analysis

Founded by Milton S.
Hershey in 1894, Hershey, Pennsylvania based Hershey Company is one of the oldest chocolate manufacturers in the United States. In addition to making its famous chocolate bars, Hershey products include: Almond Joy, Mounds, Kit Kat, York Peppermint Patties, Cadbury Chocolates, Reese’s Peanut Butter Cups and Hershey’s Kisses to name only a few. In addition, the company licenses its products for items like ice cream and chocolate milk to companies such as Klondike, Breyers and Good Humor.

In June, Mondelez made a roughly $23 billion bid for Hershey Co. in a combination of cash and Mondelez stock, which would have given Hershey shares a value of about $107 per share.
Hershey Company (HSY) Stock Sells off Sharply After Mondelez Abandons Pursuit
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The deal was subsequently rejected by Hershey Co.

Last week, Mondelez privately indicated to Hershey Co. it was willing to raise its bid to $115 per share according to sources familiar with the matter. According to the source, Hershey Co. indicated that it was holding out for at least a $125 per share bid to continue negotiations.

Nevertheless, this morning, Mondelez released a statement saying that they were abandoning their effort in acquiring Hershey Co. Mondelez, which is the owner of such well known brands as Oreo Cookies and Nabisco biscuits, was hoping to create a world leading confectionery and snacking foods company.

In the statement released yesterday after the market close, Mondelez Chairman and Chief Executive Officer Irene Rosenfeld said that, “Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement.  While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term.”

Hershey Co.’s largest shareholder, the Hershey Trust Co. owns 30 percent of the company and has 81 percent of its voting power. The trust oversees billions of dollars for a local nonprofit school and has three members on the Hershey Co. board of directors. Without their votes, a merger of the company will not be possible.

Last month, the trust settled with Pennsylvania’s top law enforcement officer that had been investigating the trust’s board over allegations of conflicts of interest and excessive compensation. The settlement included the resignation of some trust board members and a cap on compensation and term limits for board members.

The talks with Mondelez were partially stymied by the state investigation into the trust. Hershey Co. stockholders are showing their opinion in this morning’s premarket, with the share off more than -10 percent. Conversely, Mondelez shares are trading up +3.0 percent in this morning’s premarket.

Other News About HSY

Hershey trust to discuss new appointees

Trust discussed new appointees two weeks ago.

The Hershey Company Issues Notes, Receives Moody’s Rating

Moody’s rated the company’s senior unsecured note as “A1”.

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Published on Aug 30, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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