A Goldman Sachs analyst dismissed speculation that The Hershey Co. will follow Wrigley as a buyout target, saying Tuesday that the deal would not be approved, and Hershey is a less attractive candidate.
On April 28, Mars Inc. bought Wm. Wrigley Jr. Co. for $23 billion, or $80 per share. Hershey stock is up 12 percent since that time, including a 7.3 percent rise last week. Analyst Judy Hong said the gains have come from buyout speculation, but said a buyout or a joint venture are unlikely.
Unlike Wrigley, Hong wrote, the company lacks global manufacturing capabilities, does not do much business in emerging markets or quickly growing areas of the candy business and has low profit margins. Hong also thinks the stock is relatively expensive and noted the Hershey Trust controls voting rights.
She added that Hershey already has U.S. licenses for important Cadbury PLC and Nestle brands, making a joint venture less likely.
The analyst rates the stock "Sell" and keeps it on the Americas Sell List, a portfolio of stocks on which she holds a negative view. Hong has a price target of $32 per share, which implies Hershey stock will fall 17.8 percent from its Monday closing price of $38.92.
In a client note published May 31, Jonathan Feeney of Wachovia also said Hershey is an unlikely buyout target because of its lack of exposure to high-growth markets, and because the U.S. chocolate market is not particularly attractive to a potential buyer.
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