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Kit Kat could give finger to most Hershey suitors

The humble Kit Kat bar could give the finger to most of Hershey's suitors. The US candy company, which rejected a $23-billion bid from Cadbury owner Mondelez last week, licenses the British snack from Nestle, which could take the American rights back if Hershey is sold. The arrangement gives the Swiss food group leverage to play kingmaker.

Hershey spurned Mondelez's $107-per share offer, saying it provided "no basis for further discussion". Still, with the charitable trust that controls more than 80 per cent of Hershey's voting stock looking unstable, the company is arguably more vulnerable to a takeover approach than it has been for years. Along with Mondelez and Nestle, rival confectioners Mars and Ferrero might plausibly be interested.

Without Kit Kat, though, Hershey wouldn't look quite so tasty. If the US rights reverted to Nestle, it would reduce Hershey's value by $3 billion, The Wall Street Journal reported last week, citing a person familiar with the matter. The marketing pact dates back to the 1970s, when original creator Rowntree granted Hershey a perpetual license to sell its Kit Kat and Rolo brands stateside. But Nestle is able to unwind the deal if another company acquires Hershey, according to news reports.

Hershey also licenses Cadbury products in the United States, while Mondelez makes and sells them elsewhere. That's a similar possible advantage for the only potential buyer that has so far gone public with its interest.

The Kit Kat situation, however, hands some influence to Nestle. The Swiss company's recent emphasis on health and wellness might be one reason it would be reluctant to consider bidding for Hershey itself. But if the coy Pennsylvania chocolatier does eventually open up to a sale, at the very least it may need a break from Nestle.