Nestlé, Cadbury still discussing Hershey deal

Related tags Cadbury Hershey Chocolate Cadbury schweppes

Despite the fact that the sale of the company has been temporarily
put on hold, Nestle and Cadbury are said to be still discussing a
joint bid for the Hershey business, although they have not yet
decided how best to structure the deal.

The sale of the Hershey confectionery company in the US might well have been postponed by the courts, but this has not prevented companies interested in acquiring the firm from continuing their own negotiations behind the scenes.

The two leading European contenders to buy Hershey - Nestle and Cadbury Schweppes - are thought to be preparing a joint bid for the company as a means of avoiding the attentions of the US competition authorities. But while the joint bid now appears to be a reality, the two companies are yet to decide exactly how the deal will be structured, according to a report in the Financial Times​.

While Cadbury will automatically take back the rights to its own brands in the event of any sale, the British company is keen to take more than that as a means of extending its operations in the US, which have been hampered mainly by poor distribution.

The paper reports that Nestle is prepared to cede more of the Hershey business to Cadbury in the event of their bid being successful, principally because the US regulators are unlikely to allow it to make a solo bid for the group because it would control nearly 55 per cent of the US chocolate market as a result.

But exactly how this bid would be structured is apparently still to be decided, the paper said, citing sources close to the companies. The preferred structure would be a takeover of Hershey by Nestle with a part of the business then put into a separate unit to be managed jointly by the two European firms until they can be sold to Cadbury. This method would be the most cost effective, the paper said, but is likely to be unacceptable to the competition regulators.

It is also unclear as yet which parts of the Hershey business Cadbury would want to acquire - although a strong sales and distribution network will be vital - and whether there will be any conflict of interest with Nestle.

The paper cited sources as saying that Cadbury was prepared to put up around £3 billion (€4.8bn) for its share of the Hershey business, which would give it an estimated 46 per cnet of the company should the sale be allowed to go through.

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