Shares of Hershey Co. (NYSE: HSY) have jumped more than 6% on the news of the $23 billion takeover of Wm. J. Wrigley Co. (NYSE: WWY) by Mars Inc. and Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) as investors bet that the maker of the eponymous chocolate bar won't stay independent for long.Hershey, though, is a basket case thanks to soaring commodity costs and hopefully the growing interest in healthier eating. That will heighten the pressure on Hershey management to do a deal with Cadbury Schweppes Plc. or find another sugar daddy (pun intended).
The case for a merger between Cadbury and Hershey are pretty compelling as Reuters notes.
"The deal would have clear strategic logic, as Cadbury, the world's biggest confectionery group, lacks presence in the U.S. chocolate market, while Hershey is looking to expand overseas," according to the news service.
During the first quarter earnings conference call, Chief Executive David West sounded upbeat, saying the company was "making progress, while it is slower than we would like, we do see the initial signs of improving marketplace trends." He has high hopes for new products such as the Hershey Bliss. Investors, though, may not be patient.
The Hershey Trust Co., the chocolate company's largest shareholder, has resisted buyout offers in the past from Wrigley and has vowed to keep the company independent. You have to figure that the trust's board will change its tune at the right price.
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Reader Comments (Page 1 of 1)
4-28-2008 @ 6:33PM
james sanders said...
i james wsaners
4-29-2008 @ 5:13PM
RJ Investor said...
Hershey is held by an ironclad deed of trust which will make it very difficult for it to be acquired. Since the deed of trust is also in support of a school for needy children (Milton Hershey School), it will also be socially "unpopular" and the board of trustees would be viewed as "greedy" to break the trust which supports children in need.
However, any friendly acquisition that does not break this trust would probably work. But at all times this trust for a good cause should be respected and maintained.