Hershey to acquire Canadian confectionery firm Brookside Foods

By Caroline Scott-Thomas

- Last updated on GMT

Related tags: Chocolate

Hershey to acquire Canadian confectionery firm Brookside Foods
The Hershey Company has said it will acquire Canadian confectionery firm Brookside Foods for an undisclosed sum.

A privately held firm, Brookside has annual net sales of about C$85m. The Hershey Company highlighted the British Columbian company’s patented process for creating confectionery fillings based on fruit juice, as well as its chocolate covered nuts and dried fruit, saying the acquisition creates an opportunity for Hershey to enter this category.

Hershey president and CEO John Bilbrey said: "Brookside pairs dark chocolate with exotic fruit-juice centers, such as goji, acai, blueberry and pomegranate, to create great-tasting treats, while delivering the benefits of flavanols and antioxidants. We look forward to building Brookside by leveraging Hershey's scale at retail."

Hershey’s shares rose 49 cents to close at $58.69 following news of the acquisition, and had climbed a further 27 cents by 10am ET on Thursday, to $58.96.

A sweet deal?

According to a statement from Morningstar analyst Erin Lash, Hershey shares “still look pricey” following the deal.

She said that following the appointment of Bilbrey as COO in November 2010, and then as CEO in May this year, Morningstar analysts had expected Hershey to expand into emerging markets.

“We had anticipated that increasing the firm's presence in faster-growing emerging markets would take top billing, and as a result, we would not be surprised if the domestic confectionery firm looked to take part in the industry's consolidation further, especially as tastes and preferences for confectionery offerings tend to be more localized,”​ she said.

“Despite this, we don't expect international growth will contribute meaningfully to Hershey's results over the near term, given the beachheads that its competitors already maintain in these markets. Overall, at 18 times our fiscal 2012 earnings per share forecast, the shares don't offer investors a sweet deal, in our view.”

The deal is still subject to approval from Brookside shareholders, as well as regulatory approval. Hershey said it expects the acquisition to be “slightly accretive” in the year after closing.

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