Mumbai: Swiss food group Nestle is in talks with US confectionery firm Hershey on a possible merger or a stake sale, newspaper reports said.

Nestle plans to acquire 25 per cent of Hershey now and the remaining 75 per cent within a period of two years, according to the reports.

Chocolate maker Hershey has long been seen as a takeover target and has been at the centre of market speculation amidst merger of rival confectioners Mars and Wrigley.

Hershey, whose brands include Hershey's Kisses and Reese's Peanut Butter Cups, has recently been forced to raise prices on its products by an average of 11 per cent due to soaring input costs, expected to grow by over $110 million this year.

UK-based Cadbury was earlier expected to acquire Hershey, as it tries to extend its presence in the US market. Cadbury was also seen as the ideal partner for Hershey. The US company's owners, the Hershey Trust, however, has so far remained steadfast in its desire to retain control of the business.

The confectionery industry in the US has been going through a consolidation phase. Early this year, Mars acquired Wrigley for $23 billion, to create a bigger entity than Cadbury in terms of output.

If the Nestle-Hershey deal takes place, Cadbury will find itself left out of the consolidation stage.

Hershey, based in Dauphin County, has been working with JPMorgan Chase & Co. on a deal in which Vevey, Switzerland-based Nestle is a potential buyer, the Telegraph reported on its web site, citing unidentified sources.

Hershey shares rose 4.4 per cent following the report. Hershey advanced $1.80 to $42.50 in New York Stock Exchange composite trading, after hitting a high of $44.32 earlier.