By Suzanne Vranica 

Could there be a sweet byproduct from Mondelez's proposed $23 billion takeover of Hershey?

In a bid to create a confectionery giant, Mondelez International Inc. offered to buy Hershey Co. for $107 a share, The Wall Street Journal first reported Thursday, citing people familiar with the matter.

Not only would the proposed deal bring together some of the world's most well-known brands such as Oreo cookies and Hershey Kisses, but it could also be a very convenient way to ditch one of the worst corporate rebrandings in history.

Hershey promptly rejected the approach, but Mondelez had gone to certain lengths to try to win over the Hershey Trust, which holds 8.4% of the company's common stock and 81% of its voting power and would have to approve any sort of deal. Mondelez is offering, among other things, to rename the combined company Hershey, according to one of the people.

While the name might seem like a nice concession, it also would help unburden the snack-food giant from one of the more obscure and heavily criticized corporate monikers in recent memory.

"It sounds like a great favor, if they can take the Hershey name," said Scott Lerman, founding partner of Lucid Brands. "The Mondelez name doesn't have the heritage like Hershey has," he said, adding that it's "awkward."

The name Mondelez was introduced in 2012 after Kraft Foods Inc. split into two companies, with the snacks business becoming Mondelez and a grocery business remaining as Kraft.

The fact that company officials had provided a phonetic spelling of the name -- mohn -- dah-LEEZ -- when it was introduced should have been an early warning sign.

It was an odd choice for a company that includes such famous brands as Ritz crackers and Oreo cookies, and it was widely panned by branding experts and the media.

A Gawker headline read "Kraft's New Name is Crumbelievably Stupid," while a Business Insider headline used the word "Madness" to describe the decision.

"I would put Mondelez up there with some of the worst corporate names," said Kelly O'Keefe, a marketing professor at Virginia Commonwealth University's Brandcenter. "It never really resonated with consumers," he added.

Activist investor and Mondelez board member Nelson Peltz poked fun at the Mondelez name during the Delivering Alpha Conference in 2013.

"It sounds like a disease," he scoffed.

At the time of its introduction, the company said the name was meant to connote "the delicious world." It came from combining "monde," derived from the Latin word for "world," and "delez," meant to convey "delicious."

To come up with the name, the company held a contest among its employees. Mondelez was based on suggestions from an employee in Europe and one in North America and the name was tested with focus groups in 28 languages, the company said.

To be sure, corporate naming is a tough business and has become even trickier with the rise of social media, which has allowed more people to express their complaints quickly and publicly.

Look no further than visceral reaction earlier this month when Tronc was introduced as the new name for Tribune Publishing Co. , the 150-year-old brand that owns the Los Angeles Times and Chicago Tribune newspapers.

Still, Mondelez's offer to take the Hershey name flies in the face of convention. Typically, the acquiring company's name is the one that carries on. Plus, Mondelez is more than three times the size of Hershey. But Hershey clearly has a more widely known and beloved name, according to branding experts.

To be sure, there have been instances where the name of the smaller company or acquired concern wins out. For example, when SBC Communications Inc. bought AT&T Corp. in 2005, the combined company adopted the AT&T name. The SBC name wasn't as well known as the AT&T brand, which has world-wide name recognition. Also, Chemical Banking Corp. chose to take the name of it 1995 merger partner, Chase Manhattan, even though Chase was the smaller of the two.

While taking the Hershey name seems like a slam-dunk decision, ad experts said that still presents some branding problems.

"Hershey's is hard-wired to mean chocolate, and the question will be how do they make it stand for not only chocolate but a whole set of products, " said branding expert Allen Adamson.

Still, Mr. Adamson is in favor of a change.

"It will be easier to make Hershey stand for snack foods than it will be to make Mondelez stand for anything," he said.

Write to Suzanne Vranica at suzanne.vranica@wsj.com

 

(END) Dow Jones Newswires

June 30, 2016 16:26 ET (20:26 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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