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Hershey's Board Has A Duty To Argue The Case For Why It Can Do Better Flying Solo

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Hershey's Board Has A Duty To Argue The Case For Why It Can Do Better Flying Solo

Credit Suisse’s Robert Moskow believes the announcement by Mondelez International Inc (NASDAQ: MDLZ) that it has ended discussions with Hershey Co (NYSE: HSY) regarding a potential combination is likely to lead to a negative reaction to the latter’s stock.

Moskow maintains a Neutral rating on Hershey with a price target of $112.

Value Creation Needed

The analyst mentioned, “[B]roken deals like these often lead to material changes at the intended target and sometimes accelerated shareholder value creation.”

Related Link: Hershey, Facebook And More: Fast Money Picks For August 30

Moskow believes Hershey’s board now has fiduciary duty to create a strong business case, along with the management team, for why Hershey can create value as an independent entity rather than in combination with a multinational competitor.

“After two highly challenging years of category deceleration in the US and a reversal of momentum in China, we believe the company should explore accelerating its margin targets, rekindling its consumer-demand framework, or selling China into a JV,” the analyst suggested.

The Board’s Duty

Some investors might be skeptical about the board feeling obligated to create an accelerated plan, especially given the 80 percent control of stock of the Hershey Trust. However, the analyst believes the board takes its fiduciary duty very seriously.

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Latest Ratings for HSY

DateFirmActionFromTo
Jan 2020Initiates Coverage OnHold
Dec 2019DowngradesBuyNeutral
Dec 2019ReinstatesHold

View More Analyst Ratings for HSY
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Posted-In: Credit Suisse Robert MoskowAnalyst Color News Offerings Reiteration Analyst Ratings Best of Benzinga

 

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