By Evie Liu and Mackenzie Tatananni

Hershey rose sharply on a report that said Mondelez International had approached the chocolate maker about a potential takeover.

The stock rose as much as 14% to $200, putting it on pace for the largest same-day percentage increase since June 30, 2016, according to Dow Jones Market Data. Mondelez was down 3.3%.

The gains came after Bloomberg reported that Mondelez had made a preliminary approach to the U.S. chocolate maker about a deal that would create a company with sales of roughly $50 billion. Hershey and Mondelez declined to comment.

Hershey's latest rally has pushed its market valuation to nearly $40 billion, while Mondelez has a market capitalization of roughly $82 billion. A takeover of Hershey would top 2024's biggest deal in the packaged-food sector: The privately held snack maker Mars agreed to buy Kellanova for nearly $36 billion in August.

Mondelez sought a takeover in 2016 but walked away after Hershey rejected the $23 billion deal. It's unclear what an offer might be this time.

Hershey boasts more than 90 brands including Reese's and Cadbury. Weaker consumer demand, the result of inflation, the spread of weight-loss drugs, and a general shift among consumers toward less sugary diets, has weighed on the business this year. At the same time, soaring prices for cocoa and sugar have cut into margins.

In the third quarter of 2024, Hershey's net sales declined 1.4% from a year earlier, while adjusted earnings per share fell by 10%. Management lowered its forecasts for both full-year sales and earnings.

Before Monday's gains, the shares had dropped 14% over the past three months. The S&P 500 gained 11% during the same period.

Mondelez, the maker of Ritz, Oreo, and Toblerone, is in a better position because its product portfolio, which also includes beverages and salty snacks, is more diverse. The company also has a large presence in international markets, where sales have been more resilient than in the U.S.

At Mondelez, both third-quarter earnings and sales were higher than expected. Earnings rose 18% from a year earlier, while sale increased 2%.

Still, as of Friday, the shares had tumbled 16% over the past three months as downbeat sentiment weighs on the entire packaged-food sector.

Barron's recommended Hershey as a stock pick in March. We argued that while inflation had weighed on the stock, commodity prices would stabilize eventually.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 09, 2024 13:29 ET (18:29 GMT)

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