Goldman Sachs Questions Mondelez's Intentions In Hershey Bid

On Thursday, Mondelez International Inc (NASDAQ: MDLZ) made a takeover bid for Hershey Co (NYSE: HSY), pushing Hershey shares up 16.83 percent. Some experts suggested Mondelez could offer between a $120–$130/share range for Hershey after the company unanimously rejected Mondelez's' $107.00 proposal.

Goldman's Take

Goldman Sachs' Jason English believes the move has reaffirmed the chocolate industry's consolidating trend that has been going on for decades. "We argued then that "the consolidation outlook for the chocolate category remains relatively positive" yet large M&A has been absent," stated English.

Mondelez Could Be The Key To Hershey's Shortcomings

English has questioned Hershey's ability to sustainably achieve long-term sales growth targets, given U.S. deceleration risk and lack of exposure to "growth markets." These drawbacks have slowed organic sales to nearly 0 percent last year, lowering the company's long-term sales targets by 2 percent, said the analyst.

Related Link: JPMorgan's Questions About A Hershey, Mondelez Deal

English believes Mondelez, a multinational firm, could support Hershey overcoming its shortcomings. "We see strategic rationale for actions that could accelerate the international reach of HSY's brands to create value through rejuvenated growth," stated the analyst.

English still reiterated Hershey's Neutral rating and $89.00 price target, however, he added, "The stock price is more likely to be driven by strategic activity, or lack thereof, in the near future."

At time of writing Hershey traded at $111.57, down 1.69 minutes after Friday's opening bell.

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