Hershey (HSY) agrees to acquire the better-for-you (BFY) confectionery brand Lily’s with a combination of cash on hand and short-term borrowings. The Hershey Company is an American multinational company and one of the largest chocolate manufacturers in the world.
The financial terms of the deal were kept under wraps. The acquisition is expected to close in the next few months, subject to regulatory approvals and other customary closing conditions.
Lily’s is a maker of low-sugar chocolate products. Its products include an assortment of dark and milk chocolate-style bars, baking chips, and other confections such as peanut butter cups and coated nuts and popcorn.
The deal is in line with the company’s strategy to offer more reduced-sugar, organic-based alternatives. The move helps Hershey take another step towards balancing its portfolio of chocolate and candy favorites with healthier options like better-for-you snacks and confections. The deal will ultimately strengthen Hershey’s U.S. BFY confection portfolio.
Furthermore, the Lily’s buyout deal is expected to be slightly accretive to the company’s earnings in the first full year post the closing of the deal.
Chuck Raup, Hershey’s President U.S. said, “Hershey is focused on developing a BFY confection portfolio that offers a variety of choices to meet the evolving needs of our consumers. Lily’s is a great strategic complement to our existing offerings in this growing segment of the confection category.” (See Hershey stock analysis on TipRanks)
Following the acquisition, Jefferies analyst Robert Dickerson reiterated the stock’s price target of $170 (1.6% downside potential) and a Hold rating.
Dickerson said, “The brand will add further diversification to Hershey’s portfolio and help satisfy those consumers increasingly looking for reduced sugar intake.”
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 6 Buys versus 5 Holds. The average analyst price target of $173.91 implies that shares are fully valued at current levels. Shares have increased 15.7% over the past six months.