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Why Was Hershey Stock on a Roller Coaster Ride Last Week?
HSYHershey(HSY) The Motley Fool·2024-12-14 21:30

Hershey's Ownership Structure and Control - Hershey Trust Company maintains control over Hershey Company, regardless of how many shares an investor buys [2] - Hershey has Class A shares (200 million, publicly traded) and Class B shares (55 million, not publicly traded) [5][6] - Class B shares hold 10 votes each, giving Hershey Trust Company control over the company [6] Mondelez's Takeover Attempt - Mondelez approached Hershey with a takeover offer, causing Hershey's stock to soar on Dec 9 [3] - This was Mondelez's second attempt after a failed 23billionbidin2016[3]−Hersheyrejectedtheofferagain,likelyduetolackofapprovalfromHersheyTrustCompany[4][7]Hershey′sCurrentChallenges−Hersheyfacesanunprecedentedspikeincocoaprices,amajorinputcost[10]−Demandheadwindsincludetheimpactofweight−lossdrugsonconsumerbehaviorandcompetitionfromupstartcandybrands[11]−Despitechallenges,Hersheyremainsastrongbrandwith23 billion bid in 2016 [3] - Hershey rejected the offer again, likely due to lack of approval from Hershey Trust Company [4][7] Hershey's Current Challenges - Hershey faces an unprecedented spike in cocoa prices, a major input cost [10] - Demand headwinds include the impact of weight-loss drugs on consumer behavior and competition from upstart candy brands [11] - Despite challenges, Hershey remains a strong brand with 11 billion in annual sales and 1.8billioninnetincome[11]ShareholderImplications−Mondelezshareholdersmaybenefitfromthedealnotmaterializing,aslargemergersarecomplexandcostly[8]−Hersheyshareholdersbenefitfromthelong−termvisionmaintainedbyHersheyTrustCompany[9][12]−HersheyTrustCompany′suniqueownershipstructureensuresthecompany′scontinuityandlong−termfocus[12]Mondelez′sStrategicShift−Mondelezannounceda1.8 billion in net income [11] Shareholder Implications - Mondelez shareholders may benefit from the deal not materializing, as large mergers are complex and costly [8] - Hershey shareholders benefit from the long-term vision maintained by Hershey Trust Company [9][12] - Hershey Trust Company's unique ownership structure ensures the company's continuity and long-term focus [12] Mondelez's Strategic Shift - Mondelez announced a 9 billion stock buyback plan and a focus on smaller, bolt-on acquisitions on Dec 11 [9]