Hershey is considering making a bid to purchase Nestlé’s US confectionery business, which is valued between $2 billion to $2.5 billion, according to CNBC.
Nestlé said it was contemplating putting the business up for sale in June, which includes brands such as Butterfinger and BabyRuth and generated $924 million in sales last year.
Sweet manufacturer Ferrara Candy, owned by private equity firm L Catterton, may also put in an offer.
In its latest quarterly results, Hershey posted 1.5% growth in net sales and 39% growth in net income. The company said it planned to increase investments and expand its snack business.
However, a move for Nestlé’s US confectionery arm would see Hershey move away from focusing on lower sugar categories.
Other brands within the Nestlé US portfolio include SweeTarts, Nerds, 100Grand, SkinnyCow, Raisinets, Chunky, OhHenry! and SnoCaps.
The decision by Nestlé to sell its confectionery business is the first major move by Mark Schneider, who became the company’s CEO last year. He aims to focus the company on fast-growing areas such as coffee and pet food.
Indeed, last month it bought a majority stake in California-based Blue Bottle Coffee for a reported $500 million.
With sales of $27.4 billion in 2016, the US is Nestlé’s largest market. However, its confectionery business only represents around 3% of US sales.
The company said it will continue to focus on growing its international confectionery activities, centred on global brand KitKat. Last year its global confectionery sales were $9 billion.
Nestlé has been under pressure to sell underperforming areas of its business after hedge fund Third Point invested $3.5 billion in the company in June.
In a statement, Third Point said: “It is rare to find a business of Nestlé’s quality with so many avenues for improvement.”
© FoodBev Media Ltd 2017