Mondelez snags another piece of Cadbury

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Illinois-based Mondelez, which this summer made headlines for its failed bid to purchase The Hershey Co., today announced an agreement to buy the license to manufacture and sell Cadbury-branded biscuits internationally, including in North America.

Terms of the deal, which is subject to regulatory approval, were not released.

“Biscuit,” in British English, refers not to a doughy roll but a type of sweet cookie. The Cadbury variety is typically coated in chocolate.

Mondelez owns Cadbury in a deal engineered by former parent Kraft Foods, from which Mondelez was split off in 2012.

Hershey — which backed away from an effort to buy UK-based Cadbury six years ago — has held the rights to Cadbury’s U.S. chocolate brands since 1988.

The biscuits, however, have been produced under a separate license by Burton’s Biscuits Company, a longtime maker of several high-profile British biscuit brands.

Mondelez and Burton’s have agreed that Cadbury-branded biscuits will continue to be manufactured in Burton’s factories, by its employees, under a co-manufacturing agreement.

“Ownership of the Cadbury biscuits license offers us exciting opportunities to accelerate global growth and innovation, as we expand our leading position in biscuits, globally and in Europe,” said Hubert Weber, executive vice president and president of Mondelez Europe.

Related stories

Chocolate Town: CPBJ coverage of The Hershey Co. and Hershey Trust Co.

Future Hershey deal?

Hershey’s board on June 30 rejected a $23 billion purchase proposal from Mondelez, whose brands include Oreo Cookies.

Mondelez officials have not said anything beyond a statement in which they confirmed that the offer had been made, telling CPBJ they would not comment on whether plans for a new approach were under consideration.

Hershey officials’ only comment has been to confirm that the Mondelez proposal was rejected.

Nevertheless, market watchers continue to discuss whether a marriage between the two consumer food giants would be a good match.

As recently as Thursday, Barrons was discussing the views of Susquehanna analyst Pablo Zuanic, who has suggested that the probability of any new approach from Mondelez succeeding remains “very low,” at least for the coming year.

As Zuanic and other observers have noted, any such deal would require the approval of The Hershey Trust Co., the nonprofit body which remains Hershey’s main stockholder and has three members on the candymaker’s board.

Milton Hershey, who founded the chocolate company that bears his name, established the trust more than a century ago. Its purview also includes the Milton Hershey School Trust, The M.S. Hershey Foundation Trust and the Hershey Cemetery Trust.

But the trust has been embroiled in controversy as the state Attorney General’s Office investigated the panel over its composition and compensation practices. That probe last month culminated in a deal to limit pay and tenure of Hershey Trust members.

As Zuanic pointed out, a totally new trust board should be in place by early 2018, which could change the board’s views on whether or not to allow any theoretical sale of Hershey to proceed.

The issue has raised controversy for years, as successive boards examined whether to diversify their holdings so the body would be less dependent on the chocolate company’s fortunes. In general, however, the trust seems to have leaned against selling Hershey since 2002, when the company was put on the market but then pulled back amid community and political opposition to overtures from Nestlé — in a joint bid with what was then known as Cadbury Schweppes — and the Wm. Wrigley Jr. Co.

Whether Mondelez would be in a position to make a new offer is another significant unknown.

Hershey in July reported that company had recorded a net profit of $146 million for the quarter ended July 3. Last year at this time, Hershey posted a loss of $99.9 million. Hershey also announced quarterly dividends of 61.8 cents on common stock and 56.2 cents on Class B common stock, an increase of 6 percent.

Mondelez, meanwhile, recorded its 11th straight quarterly decline, CNBC reported, and analysts such as Zuanic suggest Mondelez itself could be an acquisition target.