Nestle Offer for Hershey Reported
Nestle, the Swiss food and beverage giant, reportedly has made an $11.5-billion preliminary bid for Hershey Foods Corp., the biggest U.S. chocolate maker whose trustees are now said to be growing less inclined to sell the venerable company.
The news, based on two published reports Monday, sent shares of Pennsylvania-based Hershey up 2.4%, gaining $1.77 to $76.80 on the New York Stock Exchange.
Nestle, which makes Crunch and Smarties candies, plans to offer $82 to $85 a share for Hershey, USA Today reported. Executives from the world’s largest food maker toured Hershey factories twice last week and looked at Hershey’s accounts, the newspaper said.
If Nestle were to complete the deal, it would overtake Mars Inc. as well as gain the top spot in the U.S. chocolate market. Hershey brands include Reese’s peanut butter cups and, of course, Hershey chocolate bars.
Nestle has spent more than $14 billion in the last year on takeovers, including the addition of Ralston Purina pet foods in the U.S.
Whoever buys Hershey would gain sales of $4.56 billion and 43.1% of the U.S. chocolate market. For Nestle, with 9.3% of the U.S. market last year, the purchase would put it ahead of Mars, which has 26.7%.
But a Nestle-Hershey combination would draw scrutiny from antitrust enforcers because the two companies together would control more than 50% of the U.S. chocolate market, antitrust lawyer Robert Burka pointed out.
Hershey spokesman John Long and Nestle spokesman Marcel Rubin declined to comment on the USA Today report. Rubin said there’s been “no denial or confirmation.” He repeated that Nestle wants to regain a U.S. license for KitKat chocolate that was granted to Hershey.
Nestle could regain KitKat, its best-selling chocolate brand worldwide, without buying Hershey. The North American licensing contract for KitKat has a change-of-control clause and needs to be renegotiated if Hershey gets a new owner, Nestle has said.
However, support for the proposed sale of Hershey is waning among the trustees who control the company, the Wall Street Journal reported. Two of the 17 trustees voted in March against a sale, and others are now wavering.
One board member sent letters to more than a dozen people saying the board isn’t committed to a sale, the Journal said. Most trustees want to see how much they could get for the company.
Other potential bidders include Kraft Foods, a unit of Philip Morris Cos., and Cadbury Schweppes, the Journal said.
Since the charitable trust that controls Hershey said last month it would put the candy maker up for sale, state lawmakers have opposed the idea because of concern about potential job losses.
Pennsylvania Atty. Gen. Michael Fisher is seeking a temporary court injunction to prevent any sale.
On Monday, attorneys for Hershey told a Pennsylvania court that the attorney general’s office overstepped its bounds in trying to halt any sale. Another hearing is scheduled for Sept. 3.
One member of the trust’s board has said the trust may end up allowing Hershey to buy back shares rather than sell the 108-year-old company.
