A combination of the two US companies would surpass Mars as the leader in the global candy sector, according to Euromonitor.
It would also jump far ahead of food companies Nestle and Ferrero, now in respective third and fourth places.
The new company would be a heavyweight on foreign markets — Mondelez International’s strength — and on the American market, thanks to The Hershey Company’s mass-market appeal.
Founded in 1894 in the Pennsylvania city of the same name, Hershey is a fixture in American supermarkets. Its best-known brands include Reese’s Peanut Butter Cups and Hershey’s Kisses.
The Hershey board of directors said it “carefully reviewed” a bid of $107 per share for the company and “determined that it provided no basis for further discussion between Mondelez and the company.”
A deal with the much-smaller Hershey would enhanced Mondelez’s chocolate holdings in the United States, where it is better known for products such as Oreo cookies and Ritz crackers.
The Deerfield, Illinois-based Mondelez declined to comment on the acquisition move.
Hershey shares soared 16.8 percent to $113.49 on Thursday, pushing the company’s market value above $24 billion, well above Mondelez’s bid.
Mondelez climbed 5.9 percent to $45.51, giving the company a market capitalization of $71 billion.
The stock jump for Hershey, which has 80 brands, suggests that investors think Mondelez may come back with a higher bid or that rival offers may emerge.
Nestle in the wings?
Nestle, which had given Hershey a license to produce Kit Kats in the United States, could make an offer, analysts said, but a merger might face regulatory challenges.
The Swiss food giant also could terminate its partnership with Hershey, which would reduce the US company’s value.
Hershey reported $7.4 billion in sales in 2015, while Mondelez had $29.6 billion.
However, any acquisition deal would require support from the Hershey Trust, created by company founder Milton Hershey.
The trust is chartered by the state of Pennsylvania and holds about 80 percent of the company’s common shares.
The Hershey Trust has steadfastly opposed a sale of the company in the past, as in 2002 when it torpedoed a $12.5 billion takeover offer from Wrigley, now a unit of Mars.
But the context has changed and may now be favorable for Mondelez. The Pennsylvania Office of Attorney General is reportedly investigating allegations of a conflict of interest against current and former trust board members.
To reassure local authorities and the guardians of Milton Hershey’s legacy, Mondelez would propose to adopt the group’s family name, pledge to set up operations in the region and guarantee jobs, according to US news reports.
Another huge unknown remains: the reactions of high-profile investor activists Nelson Peltz and William Ackman, both investors in Mondelez who are pushing to see it merge with a large food group.
Peltz, via his Trian Fund Management, has long lobbied for a tie-up with the snacks business of PepsiCo, where he also has a holding. But he dropped that effort when he obtained a seat on Mondelez’s board.
Ackman, who invested in Mondelez betting it would be bought by a big rival, has been eyeing a tie-up with Kraft Heinz, owned by 3G Capital and billionaire investment guru Warren Buffet.
Kraft Foods split into two companies in 2012: Mondelez, the global snacks company, and Kraft Foods Group, the North American grocery products company. Kraft and Heinz merged three years later.