Los Angeles, Sep. 22 - Hershey Co shares rose as much as 8.7 percent Monday after a London newspaper reported renewed market speculation that the U.S. chocolate maker and Switzerland's Nestle SA were in talks about Nestle buying all or part of Hershey.
But analysts reacted with caution to the report on Sunday by London's Daily Telegraph, noting that the Hershey Trust controls a majority of Hershey's shares and has repeatedly expressed its opposition to a sale of the company.
The newspaper reported Sunday on market rumors that the companies have been in talks, and said the possibility of Nestle buying a 25 percent stake in Hershey, with an option to buy the rest of the company in two years, was one scenario being mentioned.
"We don't comment on mergers and acquisition issues," Hershey Co spokesman Kirk Saville told Reuters.
Tim Reeves, a spokesman for the Hershey Trust, also declined to comment on the reports, and Nestle could not be reached after hours.
"There are takeover rumors circulating on Hershey once again. As in the past, investors are aggressively buying calls in the company on hopes that the shares will go higher," said William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York.
"Ever since Budweiser has agreed to be taken over by InBev , Hershey's has often been mentioned as the next one to be taken over. But I am always skeptical on these rumors."
About 15,000 call options traded in Hershey compared to 1,651 puts. The total was about five times the normal daily volume, according to option analytics firm Trade Alert.
A put option allows an investor to sell the company's shares at a given price and time while a call option gives an investor the right to buy the stock at a preset price and time.
Talk of a Hershey tie-up comes amid food and beverage company consolidation that includes the proposed InBev/Anhesuer-Busch deal and the planned acquisition of chewing gum maker Wm Wrigley Jr Co by Mars Inc, maker of M&M's candy.
Industry watchers have long bet that Hershey would pair up with another company to better compete with Mars-Wrigley.
But Hershey Trust officials have repeatedly said the Trust will not, and legally cannot, give up its control of the company, and spokesman Reeves told Reuters that the Trust would continue to retain a controlling interest in the company.
"Even as recently as this summer, the Trust adamantly stated that it is against a deal, and as of now, we have no reason to believe that position has changed," Morningstar analyst Erin Swanson said.
Hershey shares closed up $1.80, or 4.4 percent, at $42.50 on the New York Stock Exchange after trading as high as $44.23 earlier in the day.