How should The Hershey Company respond to a potential acquisition by Mondelez International, and what is the company worth as a standalone business (with and without operational improvements)?
How should The Hershey Company respond to a potential acquisition by Mondelez International, and what is the company worth as a standalone business (with and without operational improvements)?
In early 2025, Dorothy Ison, a junior banker at Balmain Capital, is tasked with advising the Board of Directors of The Hershey Company on a potential acquisition approach from Mondelez International. Hershey, a leading US chocolate producer, faces increasing uncertainty as shifting consumer behavior and emerging health trends raise concerns about their products’ long-term demand. Meanwhile, Mondelez, a global snacking incumbent, is exploring consolidation opportunities to strengthen its market position. Amid all of this, Hershey must assess its standalone value as a basis for evaluating potential offers. Complicating this valuation is management consideration of a significant investment in AI-driven manufacturing technology that would increase efficiency and margins but requires a substantial initial outlay. This case asks students to perform a full valuation of Hershey, estimate its cost of capital, and analyze the impact of strategic investment decisions on firm value. Students must determine whether the company’s best path forward is to maintain its current course, invest in operational improvements or sell to an acquirer in a changing industry landscape.
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