Hershey Co. has been working with Italian chocolate maker Ferrero Spa to craft a possible joint bid for Cadbury PLC, according to a published report.
It would be the first competing bid since Kraft Foods Inc.'s made its $16.7 billion offer for Cadbury, further raising the stakes for the UK confectionary company.
Hershey and Ferrero executives have been in talks for several weeks and Hershey executives are aggressive about pursuing a deal, The Wall Street Journal reported Tuesday, citing people familiar with matter it did not name.
It remains unclear if an offer will be made. The discussions are in preliminary stages and haven't included discussions of financial specifics, the Journal reported. The main issue is which company would end up taking control of Cadbury's lucrative gum and candy business.
Hershey, Cadbury and Kraft officials declined to comment on the report. Kraft said it maintains that its offer is "fair and attractive."
Representatives of Italian company Ferrero were not immediately available for comment.
A joint deal provides the advantage of combined size to compete against Kraft, which is the world's second-largest food maker. Ferrero is a privately held company which makes Nutella chocolate spread and Tic Tacs with $8.9 billion in sales last year. Hershey's earned $5.13 billion in its most recent full year.
It also remains to be determined if the Hershey Trust, a charitable organization that controls the company, would go along with a bid.
Any acquisition of Cadbury would extend the buyer's reach with Cadbury's strong presence in international markets.
But Cadbury has resisted Kraft's acquisition efforts thus far, dismissing a preliminary offer this summer and then swiftly shunning a formal bid last week as "derisory."
Nomura analysts said combining Ferrero and Cadbury operations could present some cost-cutting opportunities in Europe. But as a family-controlled entity, it is very difficult to gauge Ferrero's "stance, motivation or its financing capacity" in such a deal outside of the unattractive proposition of being left on the sidelines of consolidation taking place.