Cadbury eyes Hershey as Mars chews up Wrigley

By David Jones - Analysis

LONDON (Reuters) - Mars' bumper $23 billion agreed takeover of Wrigley WWY.N is set to reignite Cadbury Schweppes' (CBRY.L: Quote, Profile, Research, Stock Buzz) effort to sweet talk Hershey (HSY.N: Quote, Profile, Research, Stock Buzz) into a merger as the world's confectionery market becomes ever more competitive, analysts said on Monday.

The deal between the world's biggest chocolate maker, family owned M&M's maker Mars, and the globe's biggest gum maker, Wm Wrigley Jr Co, will push Cadbury off the world's top spot in confectionery just as the London-based group is planning a demerger of its soft drinks business.

The Mars-Wrigley deal will prompt Cadbury to re-start talks with the U.S.'s biggest chocolate maker Hershey Co, and the British group will hope the surprise linkup will push Hershey's controlling trust into talks, analysts added.

"Cadbury will have to look at its options and the most obvious is to re-open talks with Hershey over a merger," said Investec Securities analyst Martin Deboo.

Cadbury has held talks with Hershey before according to sources close to the situation, but the charitable Hershey Trust which controls 78 percent of Hershey's votes has maintained so far that it doesn't want to dilute its control.

However, the emergence of a Mars-Wrigley combination with over $27 billion of annual sales is expected to focus the minds of executives at Hershey with annual sales of just $4.9 billion, similar to Wrigley at $5.4 billion, while Cadbury had annual sales twice Hershey's at 5.2 billion pounds ($10.3 billion).

Mars' $22 billion annual sales come from confectionery brands such as Snickers, Twix and Starburst but also from its other businesses such as Uncle Ben's rice and Pedigree pet foods.

Analysts said a Cadbury-Hershey deal makes strategic sense as the British maker of Dairy Milk Chocolate, Trident gum and Halls cough drops lacks presence in the U.S. chocolate market, while Hershey lacks the global reach of Cadbury's confectionery.