Mondelez International Inc MDLZ is officially off the table as a buyer of Hershey Co HSY. However, the U.S. election results may have ushered in a new era of domestic M&A that could see a new round of suitors for Hershey.
Kraft Heinz Co KHC may be in the mix. Kraft has reportedly been interested in a Mondelez buyout, but Donald Trump’s victory may have put a halt on international M&A for the time being.
Citi analysts now believe General Mills, Inc. GIS or Kellogg Company K is at the top of the list for Kraft Heinz, but Hershey may be an even better fit.
For starters, Hershey has a smaller market cap than General Mills or Kellogg. If Mondelez sees value there, Kraft Heinz likely does too.
In the past, the Hershey Trust, which controls 81 percent of the company’s voting shares, has shot down a number of offers from Mondelez and others. However, Warren Buffett’s ownership of Kraft Heinz could go a long way in easing the Trust’s fears about a buyout. The Hershey Trust would know the company is in good hands under Buffett’s leadership.\
However, Buffett’s partner in the Kraft Heinz merger, 3G, is known as a stickler for cost-cutting, which may concern the Hershey Trust. In the past, the Trust has been adamant about the company’s main operations remaining in Hershey, PA. The Trust could also oppose any talks of workforce reductions as well.
After Wednesday's close, Hershey named Michele Buck CEO effective March 1, 2017, which could also throw water on any takeover talk.
There may significant obstacles to overcome in a Kraft Heinz-Hershey merger. However, the world’s richest investor could step in and make the Hershey Trust and offer that's too good to refuse.
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