Cadbury Schweppes set to bid for Hershey

Earlier this week, Mars bought Wrigley’s in a deal worth £11.6 billion. This has fuelled rumours of mergers within the sector including Britain’s Cadbury Schweppes, who is said to be considering a merger with US giant Hershey.

According to sources close to the situation, Cadbury has held discussions with Hershey in the past. However, the charitable Hershey Trust, which controls 78% of Hershey’s votes, has maintained so far that it doesn’t want to dilute its control.

A Cadbury-Hershey deal makes strategic sense, according to analysts, as Cadbury does not have a strong presence in the US chocolate market while Hershey is looking to expand overseas.

Cadbury’s management has made it clear that they are interested in a deal with Hershey in order to consolidate the confectionery industry, said analyst Ian Kellett at Numis.

If Cadbury is unsuccessful with a Hershey deal, it is believed it could face a takeover offer from North America’s largest food group, Kraft Foods Inc.

Although the US confectionery market shows low growth, it is the largest in the world, making up for 25% of worldwide sales and Hershey’s leadership position in US chocolate has helped it achieve double the profit margin of Cadbury.

Cadbury is set de-merge next month, separating its global confectionery business from its American Beverages unit and is to be re-named Dr Pepper Snapple Group Inc.

Cadbury Schweppes is the maker of Dairy Milk Chocolate, Trident gum and Halls cough drops while Hershey is the maker of Hershey Kisses and Reese’s peanut butter cups.

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