Mondelez International (MDLZ) Drops Plan To Buy Hershey

Mondelez International, Inc. (NASDAQ:MDLZ) recently confirmed that it is no more pursuing the possible merger with The Hershey Company (NYSE:HSY) . Following the announcement, shares of Hershey declined 11.70% in after-hours trading on Monday while that of Mondelez rose 3.81%.

In June, Mondelez offered to acquire Hershey for about $22.8 billion worth of cash and stocks. Mondelez had offered to pay $107 a share, half in cash and half in stock. Mondelez had expected that the merger of the two food giants would create a global leader in snacking, confectionary and complementary brands. However, Hershey’s board of directors unanimously rejected the offer in June.

Mondelez eventually reached the decision after several discussions, taking into account the recent changes in shareholders at Hershey. Reportedly, The Hershey Trust, the company’s largest shareholder, was reluctant about the sale. Moreover, significant changes in management of the Hershey Trust are underway and are expected to take time to complete.

Hershey’s sales trends have been weak since 2014 due to weak category trends, increased competition from broader snacking category and soft international growth. Notably, Mondelez’s volumes have been hurt by category weakness on account of soft consumer demand since 2014. However, both the companies recorded strong margins in the past few quarters backed by cost savings and productivity gains.

Mondelez intends to update investors at Barclays (LON:BARC) Global Consumer Staples Conference on Sep 7.

Both Hershey and Mondelez carry a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the consumer staples sector include Ingredion Incorporated (NYSE:INGR) and Omega Protein Corporation (NYSE:OME) , both sporting a Zacks Rank #1 (Strong Buy).

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