Rumours that Nestle intends to buy Hershey and thereby regain the US rights to the Kit Kat brand have been proved right after the Swiss food giant offered to pay US$11.5bn for the company. If the bid succeeds, Nestle will become the largest chocolate brand in the US. However, there is mounting opposition to the sale of this iconic US company.
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Nestle, the largest consumer foods company in the world, has revealed that it is attempting to buy Hershey Foods from its controlling trust for US$11.5bn. Hershey is the US’ largest chocolate maker – and although Nestle owns the Kit Kat brand, Hershey owns the marketing rights in the US thanks to a deal with the brand’s previous owner, Rowntree.
The possible sale of Hershey has attracted considerable local opposition, since the company is regarded as an American icon. On Friday, the Attorney General of the State of Pennsylvania asked for any sale to be blocked by the courts, on the grounds of the damage that would be caused to the town of Hershey. Hershey, also known as Chocolate Town, was built especially to serve as the headquarters of the chocolate giant. The state is also worried about the possible sale of Heinz, which is based in Pittsburgh.
The Milton Hershey School trust owns 77% of the firm’s voting shares. The Trust has made a legal challenge to the Attorney General’s attempt to halt the sale. It is trying to diversify its investments, as are many other US charitable trusts, following the recent fall in the equity markets. These legal actions may well discourage other potential buyers from bidding, as concern mounts that the controlling trust will change its mind and decide
not to sell Hershey after all.
The other probable main bidder is Kraft, part of Philip Morris. The takeover of Hershey by either Kraft or Nestle would take them to the peak of the US chocolate iceberg, as Hershey currently has an estimated market share of 29.8% to Nestle’s 10.5%.
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