Cadbury, Nestlé to share Hershey?

Related tags Chocolate Nestlé Cadbury schweppes Hershey

Nestle and Cadbury, the two European confectionery giants, are
reported to be discussing a joint bid for Hershey, the US chocolate
maker. But while a joint bid is unlikely, both firms could profit
from the sale.

Rumours that European confectionery giants Cadbury Schweppes and Nestle are preparing a joint bid for their US counterpart Hershey have been played down by the two groups.

Several UK newspapers reported over the weekend that a combined offer for Hershey was on the cards, with Nestle expected to buy the bulk of the business and Cadbury taking back the rights to its own brands - Dairy Milk, Caramel and Creme Eggs among others - which are currently licensed to the US group.

While Cadbury would be unlikely to want to see its brands pass under the control of Nestle, whose KitKat brand is also distributed in the US by Hershey, this does not mean that a joint bid is necessary. The British group would automatically get back the rights to its brands should Hershey be sold, and it is more likely to be interested in buying up any brands which Nestle might not want or be forced to sell in order to satisfy the competition regulators.

For its part, Nestle is unlikely to need Cadbury's financial support for the a Hershey bid, and while there might be some competition issues - the combined Nestle/Hershey group would control more than half the US chocolate confectionery market - these are not sufficient to necessitate a joint bid of the kind which worked so well for Diageo and Pernod Ricard in dividing up the Seagram drinks empire.

All this could prove academic of course if the legal proceedings to prevent the sale of the Hershey business are successful. Residents of the eponymous Pennsylvania town have sought to prevent the Hershey trust from selling the business - the town's leading employer. The results of that lawsuit will be known soon.

Cadbury has been particularly keen to expand its confectionery business in recent years, and has focused in particular on sugar confectionery brands. While it was never considered likely that it would go head-to-head with Nestle over Hershey, the two groups could be rivals for the sugar confectionery company Adams, put up for sale by pharmaceutical giant Pfizer. That company is more in line with Cadbury's core business, but would also be a major addition to Nestle's portfolio.

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