(Bloomberg) — Mondelez International Inc., the snacks and candy company, is exploring a takeover of iconic American chocolate maker Hershey Co., in a potential deal that would create a food giant with combined sales of nearly $50 billion, according to people familiar with the subject.
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Chicago-based Mondelez has made a preliminary approach on a possible combination, said the people, who asked not to be identified because the discussions are private.
The shares in Hershey Co. rose as much as 19% on Monday, marking the biggest intraday gain in more than eight years following the Bloomberg News report. The stock rose 12% at 10:57 a.m. in New York, giving the company a market value of $40 billion. Mondelez fell 2%, giving it a market capitalization of about $83 billion.
It’s not the first time Mondelez has sought a deal for Hershey Co. In 2016, the company abandoned discussions about a possible acquisition after rejecting a $23 billion offer from the chocolate maker.
Hershey Co. is worth roughly $45 billion, including debt, according to data compiled by Bloomberg. That means a takeover of the Hershey, Pennsylvania-based company would exceed the value of the year’s biggest deal: snack maker Mars Inc.’s deal. to buy Kellanova for nearly $36 billion including debt in August.
Any deal would require the support of Hershey Trust Co., which owns nearly all of Hershey Co.’s Class B shares. ownership, giving it approximately 80% of the voting rights in the company. The trust has been slowly selling off some of its Hershey Co. shares in an effort to diversify its holdings. If Hershey Trust were to support an acquisition, Hershey Co. could draw interest from other candidates, the people said.
Deliberations are in the early stages and there is no certainty the talks will lead to a deal, the people said. A representative of Hershey Co. said the company does not comment on market rumors. A spokesperson for Hershey Trust could not immediately be reached for comment. A Mondelez representative did not respond to multiple requests for comment.
The packaged food industry is struggling with declining volumes, slowing growth and a weakening global consumer. Companies are looking to innovation and new markets to boost sales as shoppers begin to push back on price hikes and become more conscious of their health – a trend that could lead to consolidation.
