Board of directors of Hershey reject purchase offers

Food & Drink Weekly, Sept 23, 2002

The board of directors of the Hershey Trust Co. September 17 voted 10-7 to reject two bids the trust had received for its controlling interest in Hershey Foods Corp. and to terminate a sale process that had triggered legal action by Pennsylvania's attorney general. The board met to consider Wrigley's bid of $89 a share in cash and stock and a joint offer by Cadbury Schweppes and Nestle of $75 a share in cash for the 136 million shares of Hershey Foods held by the trust, Hershey Trust spokesman Rick Kelly said.

After evaluating the bids on the basis of price, the extent to which they would help diversify the trust's investment portfolio, and the manner in which they addressed community issues and concerns such as job retention, "a majority of the board concluded neither of the two bids met the objectives," Kelly said.

The Hershey Trust Co. is the trustee of the Milton Hershey School Trust, which was established in 1910 to endow a school for poor children. In late July, the trust announced its intent to explore a sale of its Hershey Foods holdings to diversify its assets. More than half the trust's $5 billion in assets are invested in shares of Hershey Foods, of which the trust controls 77 percent of the voting shares.

The announcement was met with strong opposition from the community, which anticipated a sale would lead to job losses. Pennsylvania Attorney General Mike Fisher (R) filed a lawsuit that argued that such a sale by a charitable trust should be subject to prior court.

In a September 4 decision that was upheld September 18 by a state appeals court, the Orphans Court Division of Dauphin County Common Pleas Court issued a temporary injunction barring the trust from accepting any bids for the company pending a ruling on the underlying issues raised in Fisher's lawsuit. In papers filed in the Orphans' Court, who has jurisdiction over non-profit charitable organizations under Pennsylvania law, Fisher cited the potentially negative economic and social impact of a sale on the community. Because the community is one of the beneficiaries of any charitable trust, its interests should be considered in any decision involving a sale of trust assets, Fisher argued.

Fisher spokesman Sean Connolly said the trust's decision to call off the sale "resolves our major concern, that Hershey Foods not be sold."