Mondelēz may merge with Kraft Heinz after ending Hershey pursuit: Analyst

29-Aug-2016 - Last updated on 31-Aug-2016 at 09:57 GMT

Hershey holds rights to manufacture and sell Cadbury chocolate in the US, which has prevented Mondelēz from selling its powerhouse brand in the world's biggest chocolate market.

Mondelēz has ended its pursuit of Hershey nearly two months after the US chocolate giant rejected a $23bn takeover. Analysts speculate the Oreo owner may now merge with Kraft Heinz or PepsiCo.

Mondelēz reportedly upped its bid for Hershey to around $25bn, but said yesterday it had abandoned its pursuit.

Mondelēz’s CEO, Irene Rosenfeld, said in a statement: “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 added that taking into account recent shareholder developments at Hershey (referring to changes at the Hershey Trust), Mondelēz determined that “there is no actionable path forward toward an agreement”.

Analysts also believe Mondelēz’s Hershey pursuit was spurred by recent changes within the Hershey Trust, which holds 81% of Hershey shares.

The current Trust board has nine members, among which three of them will leave by the end of this year, and two by end of 2017, following an agreement between the Trust and the Pennsylvania Attorney General.

Either merge with large-scale companies or be taken over by Kraft

If Mondelēz indeed wants to expand its confectionery and snacks footprint, it should seek acquisitions or mergers with other large-scale companies in that space, including Lotte, Ferrero, or Perfetti Van Melle, according to SIG’s analyst, Pablo Zuanic.

“In snacks, of course, there are smaller players in the natural and organic space,” he added. However, in the end, SIG believes Mondelēz will just run out of time and will be taken over by Kraft Heinz Company, according to Zuanic’s note in SIG’s report.

Mondelēz’s spokesperson Valerie Moens told ConfectoneryNews the company cannot comment on any possible purchase move in the next 12 months.

Mondelēz leaders are scheduled to present at the Barclays Global Consumer Staples Conference on Wednesday, Sept. 7 at 9 a.m. EDT.

Morningstar analyst Erin Lash previously said in a note that it was “far from a surprise” that Mondelēz is interested in the US chocolate space, because the company has essentially been locked out of the US chocolate category after Hershey acquired the rights to the Cadbury US brands in 1988.

Mondelēz recently bought the license to produce Cadbury-branded biscuits from UK’s Burton’s Biscuits Company.