Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Rejection hurts, and for a Mondelez-Hershey deal to come together, there's a lot that has to fall in line. But as for antitrust concerns, there's nothing to see here. 

Hershey said Thursday afternoon that it rejected a preliminary offer from Mondelez after reports surfaced earlier in the day saying the Oreo cookie maker had made a cash-and-stock-bid of $107 a share. While Hershey said its board “determined that it provided no basis for further discussion between Mondelez and the company,” market watchers believe the door might still be open to a deal -- the stock closed above the bid, at $113.49. 

Should a transaction eventually get done, it would merge the owner of Cadbury with the maker of Hershey chocolate bars and Reese's peanut butter cups. These are big names in chocolate, but for folks wondering whether attempts at combining the two brands would run into antitrust hurdles, the answer is a firm no. A combined Mondelez-Hershey would command only an estimated 18 percent of the global confectionery market, according to Euromonitor International. It helps, too, that the majority of Mondelez's confectionery sales are focused outside North America, while the opposite applies to Hershey. 

chocolate2

If the deal gets across the line, it'll be the eighth-largest M&A transaction this year  and the largest consumer goods deal since Kraft and Heinz joined forces.

Trick or Treat
A tie-up between Mondelez and Hershey would be the biggest consumer-products deal this year.
Source: Bloomberg

But, there's wiggle room for it to move into seventh place. As we wrote Thursday, Mondelez's $107 a share offer -- at a bare premium of roughly 10 percent -- needs to be sweetened. This thought was echoed by Hershey's outright rejection on Thursday afternoon, but a better offer could prove tough if Hershey loses its license over KitKat in the U.S., which Nestle has the right to retain without any cost in a change-of-control, according to the Wall Street Journal

That gives Nestle the biggest advantage among potential bidders, and it, too, wouldn't run into antitrust barriers. Rather, with combined share of 12 percent according to Euromonitor, it'd still rank behind Mars and Mondelez.  That should give the Swiss giant something to chew on. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Excludes Honeywell-United Technologies, which was withdrawn

  2. Mondelez's share would be expected to shrink on the loss of U.S. licenses like KitKat

To contact the authors of this story:
Gillian Tan in New York at gtan129@bloomberg.net
Rani Molla in New York at rmolla2@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net