Cadbury, Nestle May Try to Divide Hershey

Britain’s Cadbury Schweppes was reported to have held talks with Nestle about teaming up in a bid for Hershey Foods Corp., but sources close to the matter on Sunday downplayed talk of a joint bid.

Both the Business newspaper and the Mail on Sunday said Cadbury and Nestle have discussed plans to link up and divide Hershey’s assets between them.

Cadbury declined to comment on the reports. Sources close to the situation said that though the existing relationships between Cadbury and Hershey meant there probably would be talks between the British firm and Nestle, it was unlikely the two were close to making any deals.

The Business newspaper said the talks centered on Nestle acquiring most of Hershey, with the British confectionery and drinks group picking up its own brands that are licensed to Hershey in North America.

However, one source close to the firm pointed out that Cadbury believes that the rights to its brands revert to it if Hershey is sold, so there is no need for the company to cut a separate deal to get them.

“Cadbury would get its own brands back automatically if there is a change of control” at Hershey, the source said.

The situation is similar to that of Nestle, which says the U.S. rights to its KitKat brand revert to it if Hershey is sold.

Banking sources told Reuters that Cadbury had retained investment bank Goldman Sachs to advise it in respect to the Hershey sale.

However, sources close to the company said it was never Cadbury’s intention to take part in competitive bidding for the whole of Hershey, but rather to pick up the pieces that Nestle might have to divest in order to get regulatory approval for a takeover of Hershey.

Switzerland-based Nestle spent last week playing down speculation it could overpay for Hershey. On Friday, Chief Executive Peter Brabeck rejected reports he would pay $12 billion for the American chocolate icon.

Brabeck also highlighted potential regulatory hurdles in the event of any takeover of Hershey as a combined Nestle-Hershey business that would hold more than half of the U.S. chocolate confectionery market.