Blog: Dean BestCadbury, not Nestle, is the sweeter option for Hershey

Dean Best | 24 September 2008

Forget the talk about Hershey teaming up with Nestle. All that speculation has done is serve to illuminate – once again – just how good a fit the US confectionery giant would be with Cadbury, its UK rival.

The report in the UK's Daily Telegraph that talks between Hershey and Netsle had been held raised a few eyebrows. The paper claimed that Hershey had asked JP Morgan to work on a possible deal and that Nestle had been lined up as a potential buyer.

Hershey shares jumped on the news but it seems unlikely that a tie-up with Nestle is in the offing for the struggling US candy giant.

Firstly, there is the issue of competition in the US chocolate sector. A combined Hershey and Nestle would, according to some estimates, enjoy over 50% of sales across the Atlantic, enough to raise the hackles of their competitors and US regulators.

And, secondly, there has been the hitherto reluctance of Hershey's controlling shareholder, The Hershey Trust, to give up control of the business. Question marks hang over whether the Trust would cede control over Hershey.

The Trust's obstinacy has, according to some, prevented Hershey from joining forces with Cadbury, a deal long rumoured to be the next big transaction in a rapidly-consolidating sector.

And the rumours surrounding Nestle have again emphasised just how better a fit Cadbury would be for Hershey, not least because of the UK group's minimal presence in the US and its strong positions internationally.

Whether The Hershey Trust shares that view is another matter entirely.


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