Tail Gunner Joe
Well-known member
- Joined
- Apr 22, 2005
- Posts
- 203
http://www.bloomberg.com/apps/news?pid=20601087&sid=aET4L3rg_Xk0&refer=home
Mars Purchase May Push Hershey, Cadbury to Combine (Update1)
By Josh Fineman and Chris Burritt
April 29 (Bloomberg) -- Hershey Co., the biggest U.S. chocolate maker, and Cadbury Schweppes Plc may be forced to merge after Mars Inc. agreed to buy Wm. Wrigley Jr. Co. for $23 billion to create the world's biggest candy maker.
Combining Hershey's namesake chocolate bars and Cadbury's Trident gum and Certs mints would create a company with 15.6 percent of the world's candy market, pushing it past the 14.1 percent share held by Mars and Wrigley.
Hershey has lost market share to Mars the past two years, and is confronting rising costs for cocoa, energy and milk. The largest U.S. chocolate maker reported first-quarter profit dropped 32 percent last week, while Cadbury, which plans to spin off its Dr Pepper Snapple Group Inc. drinks May 7, has reported declining earnings since the second half of 2006.
``It could prompt them to come back to the table again and revisit the potential,'' said Matt Arnold, an analyst with Edward Jones & Co. in St. Louis, who advises investors to buy Hershey shares. The combination of Wrigley and Mars ``is a much stronger competitive threat long term to Hershey,'' he said.
Hershey's last attempt to combine with a rival failed when the charitable trust that controls the chocolate maker canceled a 2002 auction that attracted bids from Wrigley, Cadbury and Nestle SA. Last year, the trust discussed how to merge Hershey with Cadbury without decreasing the trust's ownership, according to the Wall Street Journal.
Tim Reeves, a spokesman for the trust, declined to comment. The Trust was established by founder Milton Hershey and his wife, Catherine, in 1909, and exercises voting rights on behalf of the private Milton Hershey School.
Cadbury Response
Calls to Cadbury were referred to Maitland Consultancy, where a spokeswoman who declined to identify herself wouldn't comment.
Cadbury climbed 1.5 pence to 580.5 pence at 1:18 p.m. in London, while Hershey rose $1.61, or 4.6 percent, to $36.35 in New York trading yesterday.
The combination of Mars and Wrigley will have $27 billion in annual sales -- including pet food -- compared with Hershey's $4.9 billion in annual sales and Cadbury's 8 billion pounds ($15.9 billion).
Mars and Chicago-based Wrigley together will control almost 28 percent of the U.S. candy market, eclipsing Hershey's 24 percent share of consumer purchases, according to Euromonitor International Inc. in Chicago, citing 2006 sales. Cadbury is the world's biggest candy maker with 10.1 percent share.
``Not only do we believe that it is extremely unlikely that Cadbury would make a successful bid for Hershey, but we do not see other potential suitors either,'' Alexia Howard, an analyst at Sanford C. Bernstein, who advises investors to sell the shares, wrote in a note.
Mars Purchase May Push Hershey, Cadbury to Combine (Update1)
By Josh Fineman and Chris Burritt
April 29 (Bloomberg) -- Hershey Co., the biggest U.S. chocolate maker, and Cadbury Schweppes Plc may be forced to merge after Mars Inc. agreed to buy Wm. Wrigley Jr. Co. for $23 billion to create the world's biggest candy maker.
Combining Hershey's namesake chocolate bars and Cadbury's Trident gum and Certs mints would create a company with 15.6 percent of the world's candy market, pushing it past the 14.1 percent share held by Mars and Wrigley.
Hershey has lost market share to Mars the past two years, and is confronting rising costs for cocoa, energy and milk. The largest U.S. chocolate maker reported first-quarter profit dropped 32 percent last week, while Cadbury, which plans to spin off its Dr Pepper Snapple Group Inc. drinks May 7, has reported declining earnings since the second half of 2006.
``It could prompt them to come back to the table again and revisit the potential,'' said Matt Arnold, an analyst with Edward Jones & Co. in St. Louis, who advises investors to buy Hershey shares. The combination of Wrigley and Mars ``is a much stronger competitive threat long term to Hershey,'' he said.
Hershey's last attempt to combine with a rival failed when the charitable trust that controls the chocolate maker canceled a 2002 auction that attracted bids from Wrigley, Cadbury and Nestle SA. Last year, the trust discussed how to merge Hershey with Cadbury without decreasing the trust's ownership, according to the Wall Street Journal.
Tim Reeves, a spokesman for the trust, declined to comment. The Trust was established by founder Milton Hershey and his wife, Catherine, in 1909, and exercises voting rights on behalf of the private Milton Hershey School.
Cadbury Response
Calls to Cadbury were referred to Maitland Consultancy, where a spokeswoman who declined to identify herself wouldn't comment.
Cadbury climbed 1.5 pence to 580.5 pence at 1:18 p.m. in London, while Hershey rose $1.61, or 4.6 percent, to $36.35 in New York trading yesterday.
The combination of Mars and Wrigley will have $27 billion in annual sales -- including pet food -- compared with Hershey's $4.9 billion in annual sales and Cadbury's 8 billion pounds ($15.9 billion).
Mars and Chicago-based Wrigley together will control almost 28 percent of the U.S. candy market, eclipsing Hershey's 24 percent share of consumer purchases, according to Euromonitor International Inc. in Chicago, citing 2006 sales. Cadbury is the world's biggest candy maker with 10.1 percent share.
``Not only do we believe that it is extremely unlikely that Cadbury would make a successful bid for Hershey, but we do not see other potential suitors either,'' Alexia Howard, an analyst at Sanford C. Bernstein, who advises investors to sell the shares, wrote in a note.
