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Check Out Line: Will Hershey Trust resolve eventually melt?

January 27, 2010

Check out Nestle’s waiting game. USA/

It could take years, but analysts in Europe think that Nestle is waiting for the pressure of competing with two confectionery giants on its home turf to eventually melt Hershey’s resolve, letting Nestle buy the Pennsylvania-based chocolate maker.

While Pennsylvania law says the state’s attorney general would have to approve any deal that dilutes the Hershey Trust’s control over the candy maker, analysts think that eventually the trust will have to look at a Nestle bid.

Kraft’s $18.7 billion deal to buy Cadbury will likely put more pressure on Hershey in the United States, where Hershey sells most of its candy. The deal will likely edge Kraft ahead of U.S.-based Mars Inc for world supremacy in the confections market.

Hershey scrambled to come up with a counterbid for Cadbury, the last best chance Hershey had to significantly expand its business outside of the United States, but failed to put an offer together that could trump Kraft.

Now, while we are looking forward to Flake bars and the like coming to the United States, Hershey probably does not need that competition. Plus, Kraft is eventually expected to want to take back from Hershey the rights to manufacturer and sell Cadbury and Carmello bars in the United States, another hit to Hershey’s revenue.

With increased U.S. competition, how long before the Hershey Trust looks to Switzerland to get it out of a chocolate mess?

Also in the basket:

U.S. households struggle to afford food: survey

Home Depot laying off 1,000 employees: memo

Apple tablet portends rewrite for publishers (WSJ)

(Reuters photo)

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