Analysts say Hershey faces significant obstacles to a potential takeover

The Hershey Company (HSY, Financials) saw its stock price briefly rise on takeover rumors, but structural and legal obstacles make a purchase of the venerable chocolate maker unlikely, according to a new research note from JPMorgan. HSY shares have fallen 11.5% over the past six months.

JPMorgan analyst Ken Goldman noted that any potential takeover would be seriously hampered by Hershey’s dual-class stock agreement. In the past, Hershey Trust Company, which owns about 80% of the voting rights over Class B shares of 10 votes each, has resisted the purchase efforts. Hershey notably rejected takeover offers from Wrigley in 2002 and Mondelez International (MDLZ, Financials) in 2016.

Making matters worse, Pennsylvania law allows the attorney general to intervene if a transaction affects the trust’s voting rights, adding an additional layer of regulatory scrutiny to any potential transaction.

Hershey is now outgrowing these structural protections. The company announced a $250 million supply chain improvement in October 2024 and named Deepak Bhatia, previously of Amazon, as its first chief technology officer to lead technical innovation.

The brand experienced its first festive design change in 89 years when the company introduced KitKat Santas in November 2024. Hershey also introduced plant-based chocolate products in March 2023 to address changing customer tastes.

From a financial perspective, Hershey said net sales will be $11.17 billion in 2023, compared to $10.42 billion in 2022. The company recently lowered its annual income and profit forecasts, declining Demand blamed as a result of increased prices, which are intended to offset rising raw material costs, particularly for cocoa.

This article first appeared on GuruFocus.