Nestlé, Cadbury still linked to Hershey buy

- Last updated on GMT

Related tags: Chocolate, The hershey company, Hershey, Cadbury

Hershey will find out on Wednesday whether its appeal against a
court ruling postponing the sale of the confectionery group has
been successful. In the meantime, rumours continue to circulate of
a potential joint bid for the firm by Europe's Nestle and Cadbury.

The sale of the Hershey Foods business in the US was put on hold by the courts last week pending an investigation into the social and economic consequences of the transaction, but this has not put an end to the rumour mill regarding possible bids for the company.

Once again the speculation is centred on a possible joint bid for the business by European confectionery groups Nestle and Cadbury. The two companies were linked to a joint bid for the business last week, with analysts speculating that such a deal would neatly avoid any competition concerns which a bid by Nestle alone would have raised.

Those rumours suggested that if the two companies made a joint offer for Hershey, Cadbury would be able to take back the North American rights to its own brands currently held by Hershey, a move which would be likely to appease the regulators.

But Cadbury pointed out that it would regain the rights to these brands in any case if Hershey were sold to a third party, and that it did not need to a make an offer for the firm. Nestle also dismissed the speculation, saying that the competition authorities would rule out any possible bid, joint or otherwise.

However, these statements have done little to stop speculation that the two companies are indeed discussing the possibility of a joint bid, with Cadbury lining up to take far more of the Hershey business than just its own brands.

Although the courts will have to approve the final sale of the Hershey business - assuming the Hershey Trust which wants to sell the business is unsuccessful in its bid on Wednesday to overturn last week's decision by the Pennsylvania courts - Hershey is still proceeding with the sale process, and is thought to have asked for bids for the company to be made some time this week.

While Cadbury is a major player in the UK chocolate confectionery market, its international business has been built primarily on sugar confectionery, and the British firm is thought to want to redress that balance in the US. Its previous business there was taken over under licence by Hershey in 1988 after Cadbury failed to make any headway, mainly because of sales and distribution difficulties.

Press rumours now suggest that Cadbury is keen to press ahead with a joint bid for Hershey alongside Nestle because that would allow it acquire a substantial chocolate confectionery business in the US, with an established distribution network and sales force to push not only its own brands but presumably others which it would acquire as part of the deal.

Clearly such a deal would also favour Nestle, which has always said that simply handing back control of the Cadbury brands would not be enough to appease the competition authorities in the US. No details of the possible talks between the two companies have been revealed, such as which brands would be of interest to the two companies.

Other potential bidders for Hershey include Kraft Foods and Wrigley, the US confectionery groups.

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