For more than a century, Hershey — an American candy icon so well known it gave its name to its Pennsylvania hometown — has stood independent, rebuffing numerous attempts to buy the maker of Kisses and Reese’s Peanut Butter Cups.
Now, it faces one of its biggest challenges yet, in the form of a fellow chocolate giant eager to strike a big takeover deal.
In rebuffing a $23 billion offer from Mondelez International, whose own products run from Oreo cookies to Cadbury chocolate, Hershey is betting that it can stay on its own, or at least fetch a substantially higher price.
But flatly rejecting Mondelez’s offer will be a major test of Hershey’s historically impregnable defense: the charitable trust that effectively wields control.
The offer, made in a letter on June 23 after months of on-and-off discussions between the two companies, would make a blockbuster merger in a year that has been sorely lacking in hugely prominent deals. Moreover, it is a bold move by Mondelez at a time when other would-be deal makers have grown more cautious in the face of uncertain winds in the marketplace and the economy.
Mondelez’s move has also raised questions about whether other food companies will seek to make their own run at Hershey — or whether Mondelez itself may be put into play. After the activist investor William A. Ackman took a big stake in Mondelez nearly a year ago, speculation emerged that he would push for a sale, possibly to Kraft Heinz.
Mondelez, cleaved from what once was Kraft, has offered $107 a share in cash and stock, a 10 percent premium to Hershey’s closing stock price on Wednesday. Hershey, however, said on Thursday that its board had “rejected the indication of interest and determined that it provided no basis for further discussion between Mondelez and the company.”
Mondelez declined to comment.
Hershey would represent the biggest takeover by Mondelez since its former parent bought Cadbury of Britain in a $19 billion deal more than six years ago. That transaction, too, took time, and Cadbury initially rebuffed the American food behemoth’s advances.
Pursuing Hershey is a different matter. A trust holds about 8.4 percent of the candy maker’s shares, but has about 81 percent of the company’s voting power. The shares of the company — both the common and the special Class B shares — are owned by the Milton Hershey School Trust, but are voted on by the Hershey Trust. The Milton Hershey School was founded in 1909 for underprivileged children by the company’s founder and his wife.
The trust has flexed its muscle several times over in the last two decades. When the Wm. Wrigley Jr. Company wanted to buy Hershey at a 42 percent premium in 2002, the trust called off the sale at the last minute.
When the trust became unhappy with Hershey’s performance and deal talks with Cadbury in 2007, it asked for the resignation of six directors.
And when Hershey wanted to challenge Kraft for Cadbury in 2010, a rift between the company and the trust forced the Pennsylvania chocolatier to bow out.