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Hershey may seem sweeter to Mondelez

| Friday, Oct. 28, 2016, 9:45 p.m.
FILE - In this April 21, 2010 file photo, Hershey's miniatures and kisses are displayed in Tampa, Fla. The cost of the ingredients in chocolate is rising, and the nation?s biggest candy makers have already warned that shoppers are going to see price hikes in 2015. (AP Photo/Chris O'Meara, file)
FILE - In this April 21, 2010 file photo, Hershey's miniatures and kisses are displayed in Tampa, Fla. The cost of the ingredients in chocolate is rising, and the nation?s biggest candy makers have already warned that shoppers are going to see price hikes in 2015. (AP Photo/Chris O'Meara, file)

Hey Mondelez, how does $125 a share look now?

It was just two months ago that Mondelez International Inc., the $70 billion international snacks business formerly part of Kraft Foods, dropped a poorly executed attempt to acquire chocolate behemoth Hershey Co. Mondelez had made a low-ball bid of $107 a share in cash and stock, which was difficult to take seriously when Hershey — a trust-controlled entity with deep ties to its hometown, long considered an unwilling seller — already traded in the high $90s. It was reported at the time that Hershey would only discuss a sale to Mondelez if the price started at $125 a share. The talks never did begin.

On Friday, Hershey shares surged about 6 percent to $101 and change after it reported better-than-expected third-quarter profit on sales that were in line with estimates. The $22 billion company is trying to show investors how it can hold up as not just candy makers, but the entire packaged-food industry faces slow-to-no growth and many consumers turn toward healthier-ish options. Hershey has cut costs including advertising spending and is ramping up innovation by introducing new versions of old favorites, such as the Reese's Pieces peanut butter cups mashup — yet another iteration of a more than 80-year-old product.

Hershey's recent performance could warrant another, more thoughtful look from Mondelez, which is the second-biggest seller of chocolate globally thanks to its Cadbury brand but is trying to make a push into the U.S. chocolate market. Buying Hershey, the industry leader, would be much easier.

Mondelez, which was intended to have more of an international focus, is now realizing that because of sugar-addicted Americans, the United States is still probably the best place to be. That's especially true when the strong dollar is eating profit earned overseas. Hershey is still North America-centric.

Those points aside, the longer-term outlook for Hershey isn't so rosy that the company is above selling itself should it receive a fair offer. Aside from the boost it got when Mondelez proposed a merger, Hershey's stock has been flat for two years and only one of 21 analysts tracked by Bloomberg recommend buying the shares at these levels.

Hershey is working to drive down costs, the same strategy that helped Mondelez post profit this week nearly 20 percent above analysts' average forecast.

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