Earlier this year, Nestlé S.A. said it was “exploring strategic options” for its nearly U.S. confectionery business, expected to be valued between $2 billion and $2.5 billion. The company said it would conduct a strategic review on the U.S. market this year.
Nestlé's U.S. confectionery division pulled in $922 million in 2016 — about 3 percent of its $27.4-billion U.S. business, the company said in a news release. It primarily includes chocolate brands such as Butterfinger, Baby Ruth, 100 Grand, SkinnyCow, Raisinets, Chunky, OhHenry! and SnoCaps, as well as sugar brands such as SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts. It also includes the international chocolate brand Crunch.
Requesting anonymity, CNBC’s sources said companies often make initial bids without submitting a final offer. A request for comment from Hershey was not immediately returned.
Hershey, which acquired KRAVE jerky in 2015 and Brookside Food in 2011, already licenses Nestlé brand Kit Kat in the U.S. However, the company was subject to an acquisition attempt by Mondelez International in 2016, which Hershey’s board ultimately rejected.
Ferrero Group and Ferrara Candy, owned by private equity firm L Catterton, are also expected to submit preliminary offers. In August, LEAF Brands CEO Ellia Kassoff said the Newport Beach, Calif.-based company would also participate in the auction for Nestlé’s U.S. candy business.
“We spent many years rolling the products back to their original (and successful) designs after many failed versions by Nestlé, and during that period we’ve had the opportunity to interact with many of the current and past Nestlé confectionery employees, which has helped us to understand their business,” Kassoff said in a news release. “We know what it will take to revive and grow the Nestlé business in the U.S. and feel there is tremendous opportunity for us to partner with other investors to make the new company the most innovative, creative and profitable company in the U.S. confectionery space.”
Nestlé’s strategic review does not cover Toll House baking products, a brand which the company will continue to develop in the U.S. market. The company also plans to grow its $8.8-billion global confectionery business, particularly through Kit Kat.
Nestlé, which took the No. 5 spot in Candy Industry’s 2017 Global Top 100 ranking, said it will continue to innovate across other categories such as pet care, bottled water, frozen meals and ice cream.