 Famous chocolatier Hershey’s is looking to sell the operation despite community outrage.
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The proposed sale of Hershey Foods Co., the maker of Hershey's Kisses and Reese's Peanut Butter Cups, is turning into a surprisingly complex matter. Since the company put itself up for sale in late July, the Hershey community and school as well as the state's attorney general and gubernatorial race have made the saga into a soap opera.
A sale of a company rarely turns complicated, but Hershey Foods Co. is an unusual company. The company's largest shareholder is the Milton Hershey School Trust, owner of a third of the company's stock. It owns 77 percent of the voting power, esentially running the company. The trust is a charitable foundation that runs the Milton Hershey School in Hershey, PA, giving free local education to about 1,200 disadvantaged children. On July 25, the trust shocked analysts and the community by announcing that it was selling its share in Hershey Foods. The trust, a for-profit corporation, thought that in light of the recent volatile market conditions, and as a sole benefactor of the Milton Hershey school – founded in 1909 by Hershey Foods founder Milton Hershey – it needed to diversify its holdings, 52 percent of which were in Hershey Foods.
After the news, Hershey's stock jumped 20 percent to over $70 a share, as analysts speculated about possible buyers, including the Kraft Foods and the Swiss company, Nestlé. The consensus estimate was that the $10 billion company would sell for somewhere between $87 to $95 a share, or $12 billion to $13 billion.
The announcement drew immediate criticism from numerous sources. The Hershey community, whose life depends on Hershey Foods, opposed the deal, fearing that the sale of the company would lead to job losses and factory closings. The Milton Hershey School alumni similarly criticized the proposal, claiming that the trust is operating against the philanthropic philosophy of the company's founder, Milton Hershey, and called for a change in the trust board. The Milton Hershey School Alumni Association pressed the state legislature to halt any possible transaction pending investigation of the trust board, which was investigated and ordered to reform by the attorney general for conflict of interest for also acting as the school's board.
Meanwhile, two weeks after the proposal was announced, Pennsylvania Attorney General Mike Fisher, regulatory authority on charities, asked the trust to consider alternatives after a long meeting with the trust's board. A week later, he petitioned the Dauphine Country Orphan's Court to approve any deal, claiming that the court has jurisdiction because the trust is a charitable foundation and the sale of Hershey would affect the welfare of the public. The trust has insisted that an outright sale of its shares yields the most financial benefits.
