US chocolate major Hershey rejects $23-bn takeover bid from Mondelez

US chocolate and confectionery major Hershey Co yesterday rejected a $23-billion unsolicited takeover bid by Mondelez International Inc without assigning any reason for it.

Hershey said that it had received a $107-a share preliminary cash and stock buyout offer, which also included other non-monetary considerations.

''The Company's Board of Directors, after receiving input from the Company's management and its outside financial and legal advisors, carefully evaluated the indication of interest. Following this review, the Board of Directors of the Company unanimously rejected the indication of interest and determined that it provided no basis for further discussion between Mondelez and the Company,'' Hershey said in a statement.

Hershey shares traded above Mondelez's bid of $107, indicating that investors expected a better offer.

Mondelez, based in Deerfield, Illinois, had pledged to protect jobs if the deal were to go through, relocate its global chocolate headquarters to Hershey and rename the company Hershey, The Wall Street Journal reported yesterday.

But a deal would require the nod of the tight-knit Hershey Charitable Trust, which holds 8.4 per cent of Hershey's common stock and 81 per cent of its voting power.

The trust has blocked takeover bids for Hershey in the past and had fiercely fought to keep the company independent.

In 2002, the trust had blocked Hershey from being acquired by Wm. Wrigley Jr. Co for $12 billion.

Founded in 1894 by Milton Hershey, the Pennsylvania-based company is North America's leading manufacturer of chocolate, non-chocolate confectionary and chocolate-related grocery products.

Some of its most well known chocolate brands include Hershey's Kiss, Kit Kat, and Reese's Peanut Butter Cups, but its confectionery offerings also include gum and mint refreshment products, pantry items such as baking ingredients, toppings and beverages, and snack items such as spreads, meat snacks, bars, and snack bites and mixes.

The company markets its products under approximately 80 brand names in over 70 countries across the world.

Hershey already has also had a tie-up with Cadbury since 1980 to market Cadbury's candy in the US market. UK-based Cadbury was acquired by Kraft Food in 2009 for $19.6 billion.

A little over two years after acquiring Cadbury in a hostile takeover, Kraft split into two independent public companies focusing on snacks business called Mondelez International and a North American grocery business that retained the name Kraft Foods.

Hershey has a market cap of around $24.44 billion and reported net profit of $3.4 billion last year on sales of $7.4 billion.

Mondelez is the world's second-largest confectionary company and a successful deal with Hershey would catapult it to the top place with 18 per cent market share, ahead of current leader Mars Inc, which holds a 13.5 per cent, according to Euromonitor International.

A deal would also give Mondelez a hold over sales of Cadbury brand chocolates in the US, for which Hershey currently holds the license but pays royalties to Mondelez.

It would also give Mondelez the US production and distribution rights for Nestle's popular Kit Kat chocolate, which Hershey holds the rights for in the US market and pays sales-based royalties to Nestle.