What's going on?

Mondelez, the maker of Oreo cookies and Cadbury chocolate bars, has made an offer to acquire its competitor Hershey in what would be a $23 billion deal. But Hershey rejected the offer out of hand. The news of the offer was first reported by The Wall Street Journal.

What does this mean?

Similar to the media companies in our first article (above), this is a deal about gaining more scale (although in an industry that is already more concentrated than media). By combining their operations, the two companies could likely cut costs and would have more bargaining power with the stores that stock their brands. One catch, however, is that Hershey is controlled by The Hershey Trust � a charitable trust set up more than a hundred years ago. And the trust has previously squashed other takeover attempts just like it has with this one (so far).

Why should I care?

For the stocks: Both stocks were up on the news. As one would expect, Hershey�s jumped the most (about 17%) as Mondelez�s bid was significantly above Hershey�s stock price prior to the news leaking. But Mondelez�s stock also went up (about 6%) which probably reflects investors� belief that the deal would be a good idea for Mondelez. Now that Hershey has rejected Mondelez�s initial offer, the question for Mondelez is whether it comes back with a higher offer. Another question is whether a different bidder emerges for Hershey.

The bigger picture: This potential deal shows the power of voting versus non-voting shares. The Hershey Trust (the charitable trust) only owns about 8% of Hershey but it controls about 80% of the voting power. That�s because, at some point in its history, it issued �non-voting� stock to investors instead of �voting� stock. Mark Zuckerberg has just done something similar with Facebook. This shows how, down the road, a minority shareholder can enact majority control � and it doesn�t matter what the non-voting shareholders think.