Hershey Co. shares modestly gained 16% during the course of the trading session, after Mondelez made a bid to acquire the chocolate giant, which will merge both companies and build the biggest candy makers in the world.
Based on reports, the buyer’s deal is 50% each in cash and stock, suggesting a $107 per piece in cash.
The manufacturer of Cadbury chocolate bars, Mondelez International Inc. sent a letter addressed to Hershey with sources citing that it offers a merger. Apparently, there were no exact terms of the deal, but the market value of the company settled at $21 billion, suggesting that the offer seemed to be higher than that.
Subsequently, the market capitalization of Mondelez is worth $69 billion.
The acquirer will find support on balancing its portfolio from the deal, which mainly targets overseas markets. Hershey generated 90% revenue from North America in the past year, citing most of it were boosted from chocolates.
Furthermore, any type of a deal would be subject to Hershey Trust approval, that holds about 8.4% shares and 81% of the overall voting power. The Trust had previously turned down ideas in selling the company last year.
Mondelez made a pledge to ensure that all jobs post-merger are in safe hands, and will move its global chocolate headquarters in Hershey, Pennsylvania. The new business will still be named after Hershey’s.
The acquirer needs an approval from the Hershey’s Board prior to the Trust’s. Moreover, a takeover is anticipated to result in Hershey’s Kit Kat license going back to Nestle. Thus, it implies that the business will not take part of the deal.
It is significant that Kit Kat generates more than 10% of Hershey’s earnings before interest, taxes, depreciation, and amortization.
After the proposed deal, the two companies’ stocks made its way to greener pastures. Hershey stocks rose 16.08% and settled at $112.76, while MDLZ stock added 1.93% to changed hands at $43.80.
Hershey has recently confirmed that the taking over of Mondelez has been declined by the chocolate giant, and said that it provided no basis for further statements between both companies.
Based on the latest press release, Hershey’s Board had carefully assessed the indication of interest mainly from the operational, financial, and legal aspects, and unanimously turned down the offer.
Conversely, there were still no reaction observed in the market, and the two companies’ shares remained soaring. Hershey stock added 16.01% to changed hands at $112.70, while MDLZ shares increased by about 5.56% and settled at $45.36.
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