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Hershey Sweetens Its Portfolio

Zacks Equity Research

With expansion prospects, the U.S.'s largest chocolate maker The Hershey Company (NYSE:HSY - News) has set forward an agreement to acquire a private Canadian confectionary company named Brookside Foods Ltd. based in British Columbia. The terms of the deal are not yet disclosed.

Though Hershey has not received any regulatory consent, the company expects to expand Brookside product line, which consists of chocolate-covered traditional fruits and nuts and chocolate-covered fruit juice pieces, in the retail category.

Brookside’s products are primarily served in U.S. and Canada and generate a total sale of approximately $85 million Canadian dollars annually.

Once the deal is closed, Hershey – which makes Reese's Peanut Butter Cups and York Peppermint Patties – will be benefited by Brookside’s patents that ensure differentiation of its products from real fruit juice. Further, it expects the acquisition to be accretive in the subsequent year of closing.

Hershey also posted in line results on October 27 with adjusted earnings of 84 cents a share in its third-quarter 2011. However, it surpassed the prior-year adjusted earnings of 79 cents per share. The company also expects 2011 adjusted earnings per share to increase around 10% for the full year. Further, Hershey’s expects its 2012 adjusted earnings per share to be within the company’s long-term 6%-8% objective.

Exceeding the initial expectations, Hershey’s net sales also rose 5% to $1.6 billion, buoyed by volume gains from Halloween and strong response from its new products of Reese's Minis and Hershey's Drops.

Based in Pennsylvania, Hershey engages in manufacturing, marketing, selling and distributing various chocolate and confectionery products, pantry items and gum and mint refreshment products worldwide.

Hershey, which competes with Kraft Foods Inc. (NYSE:KFT - News), currently maintains a long-term Neutral recommendation on the shares. Additionally, the quantitative Zacks Rank for Hershey is #3, which is equivalent to a short-term Hold rating.

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