This past week was certainly a busy one for the M&A world, with Mondelez's proposed acquisition of Hershey (NYSE:HSY) and Lions Gate's (NYSE:LGF) targeting Starz. If both deals came to fruition under the terms of their respective offers, they would cumulatively be worth more than $25 billion.
Unfortunately for Mondelez International (NASDAQ:MDLZ), the board of the Hershey Trust, which controls more than 80% of the company and its voting rights, has evidently made it clear that the Hershey Company is not for sale. The Trust has been known for being persistent in rejecting buyouts in the past, however. A 2002 $12 billion offer from the fellow confectionary giant William Wrigley Jr. Company was also promptly rejected by the Hershey Trust. The list of failed acquisitions in Hershey's past includes offers from Nestle and Cadbury Schweppes, which is now owned by Kraft.
The buyout could have the potential to be quite a successful strategic move. As two of the five largest candy makers in the world, a Mondelez and Hershey merger would create a confectionary giant. Additionally, their businesses appear to be quite complementary to each other; Hershey has a more established name in the United States whereas Mondelez's is better known internationally.
Acquiring Hershey may potentially be an act of survival for Mondelez. William Ackman, a significant investor and shareholder of Mondelez, has urged for the company to grow its revenue or become a target company itself. For this reason, Mondelez was willing to grant significant concessions to Hershey in its initial offer. The former was willing to purchase the latter at a 10% premium to its closing stock price before the deal's announcement and also ensure that the resulting combined company would maintain the Hershey name and its headquarters in Hershey, PA. Perhaps, by rejecting the initial offer, the Hershey Trust is simply waiting for Mondelez to increase its $23 billion spending limit or for another potential buyer to come along and sweeten the deal.
In the vastly different world of the entertainment industry, Lions Gate, the studio whose notable productions include "Orange Is The New Black" and"The Hunger Games", looks to make a strategic purchase of Starz, the premium television network. Such a combination would certainly be a formidable one. Lions Gate's performance in recent years has been relatively inconsistent, with "The Hunger Games" being a huge success and relative duds "Gods of Egypt" and "The Divergent Series: Allegiant" following, reflecting the up and down nature of the film-production business as a whole. The addition of a prominent channel such as Starz, with its 24 million American subscribers, would hopefully bring the studio a more consistent source of revenue.
Unlike Hershey's response to Mondelez' offer, Starz seems content being acquired by Lions Gate after a year of on-and-off talks between the two. As a combination of stock and cash, the deal is valued at $4.4 billion, with PJT Partners advising the target and boutique investment bank Liontree Advisors working on the buy-side.