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Hershey shares jump on Cadbury owner buyout report

Getty Images Hershey's chocolate bars and Reese's brand peanut butter cups at a store in the US.Getty Images
Mondelez has reportedly made an approach to the maker of Hershey's chocolate

Shares in US chocolate maker Hershey have jumped by more than 10% after a report that Mondelez International, which owns UK-based Cadbury, has approached the firm about a potential buyout.

A deal could create a snack food giant with combined sales of almost $50bn (£39.2bn) a year.

Both Mondelez and Hershey declined to comment on the report when contacted by BBC News.

In 2016, Hershey rejected a $23bn takeover offer from Mondelez.

The approach is still in the preliminary stages and it is not certain that talks will lead to a deal, according to Bloomberg.

Any deal would need the approval of the Hershey Trust Company, a charitable trust, that maintains voting control over the business. It has previously blocked the takeover of the firm.

A merger of the two companies could bring some of the world's best-known confectionary and snack foods under one roof.

Hershey is known for brands including Hershey's Kisses and Reese's Peanut Butter Cups.

As well as owning Cadbury, Mondelez brands include Ritz crackers, Oreo biscuits and Toblerone chocolate.

The packaged food industry has faced slowing growth as consumers feel the pinch from years of rising prices.

Chocolate companies in particular have had to transfer costs from higher cocoa prices to their customers.

Last month, Hershey cut its revenue and profit forecasts. Its chief financial officer, Steve Voskuil, said high cocoa prices will be the "biggest source of inflation" for the firm going forward.

Another food giant, Kraft Heinz, also recently cut its annual sales and profit forecasts as customers cut back on purchases after several rounds of price rises.

Some companies have looked for deals to secure new markets and boost growth.

In August, confectionery giant Mars struck a deal to snap up Pringles and Pop-Tart-maker Kellanova for almost $36bn.

Some analysts have forecast an increase in mergers during the upcoming Trump administration, as the president-elect is seen as more friendly towards deal making.