Why Nestle Probably Doesn't Have the Appetite for Hershey

Could Nestle (NSRGY)  , the world's largest food maker that's still only No. 4 in the U.S. chocolate market, be hungering to gulp down market leader Hershey (HSY) ?

Fat chance, say experts who dismiss last week's M&A-fueled Hershey share spike as nothing beyond a short-lived sugar rush. They say Nestle is looking to build global brands and overcome China weaknesses, while Hershey is an improbable target given a rigid ownership structure nearly as old as the 122-year-old Pennsylvania icon itself.

A Nestle spokesman was not immediately available to comment.

Nestle shares were down 1.1% on Monday at Sfr71.30, putting its market value at around Sfr 227.1 billion ($234.9 billion). Hershey shares closed little changed Friday in New York at $96.40, for a market value of around $20.6 billion. So far this year Nestle is down down 4.5%, while Hershey is down 8%. 

Analysts see little chance - and limited motivation -- for Nestle to go after Hershey, now or ever.

"I would give any deal between Nestle and Hershey a less than 50% chance of happening," said a Switzerland-based analyst on Monday who asked not to be named. The low odds come despite Nestle having "a chocolate issue in North America," where Hershey is No. 1 followed by Mars. Nestle's brand portfolio includes Kit Kat and Butterfinger candy bars and the eponymous Toll House chocolate chip cookies.

He said the main barrier to any deal would be Hershey itself - or rather the charitable Hershey Trust foundation, set up in 1905, that controls the company and has the power to block any unwanted suitor. "The foundation would be the biggest stumbling block to anything happening," he said.

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