Hershey and Mondelez: A Sweet Attempt with a Bitter Aftertaste

Investing in stocks means acquiring an ownership stake in a company. While this stake is minor for most investors, there are enough wealthy individuals who can purchase enough shares to control an entire company. However, in the case of the candy giant Hershey, this is not possible because control lies with the Hershey Trust Company—a fact Mondelez International recently had to acknowledge again. Hershey's stock price experienced a wild rollercoaster ride this week, similar to the Candymonium roller coaster at Hersheypark, as news surfaced that Mondelez had once again made a takeover bid. Mondelez attempted to acquire Hershey for $23 billion in 2016 but failed. This time too, success was elusive after reports of yet another rejection by the Hershey Trust caused Hershey's stock price to drop. Interestingly, there was neither a shareholder vote nor an official statement from Hershey CEO Michele Buck, and no committee was formed to review the offer. The reason for this seems to be that Mondelez's offer never reached the point where such steps became necessary. The real deciding factor is the Hershey Trust Company Board, whose approval Mondelez did not receive. Such companies typically have a complex stock structure. Hershey involves publicly traded Class A shares, with about 200 million in existence. However, it is the nearly 55 million Class B shares, which are not publicly traded and grant ten votes per share, that actually control the company. This arrangement ensures Hershey Trust Company retains leadership. Neither Mondelez nor Hershey officially commented on the current negotiations, leaving details unclear. What is known is that the offer was not convincing enough for Hershey Trust Company. Perhaps a stroke of luck for Mondelez shareholders, as the effort required for a takeover of this size would have been immense. Hershey's market value stands at around $36 billion, and Mondelez would have had to offer significantly more to succeed.