- The Washington Times - Tuesday, August 27, 2002

HARRISBURG, Pa. (AP) Attorneys for the majority owner of Hershey Foods Corp. told a Pennsylvania court yesterday that the attorney general's office overstepped its legal bounds in trying to halt a potential sale of the nation's largest candy maker.
Senior Judge Warren G. Morgan of Dauphin County scheduled arguments for Sept. 3, even as the secretive bidding process for the 108-year-old company appeared to be moving along.
A report yesterday had Swiss food and beverage giant Nestle offering about $11.5 billion for the candy maker. Nestle, whose brands include Crunch candy bars, Taster's Choice coffee and Perrier water, declined to comment on the report in USA Today.
"Nestle does not comment on market fantasies," said spokesman Francois-Xavier Perroud.
USA Today, citing unidentified people familiar with the deal, said Nestle had made a preliminary bid of $82 to $85 per share. Hershey's stock rose $1.77, or 2.4 percent, to $76.80 yesterday.
Spokesmen for the trust and the candy maker each declined to comment on the report.
In a motion asking that the attorney general's petition be dismissed, attorneys for Hershey Trust Co. and the Milton Hershey School said the trust has the legal right to sell the company. The trust is Hershey Foods' majority owner and the benefactor of the school for disadvantaged youth.
Granting Attorney General Mike Fisher's request for a temporary injunction against a sale could cause "gross and severe harm and injury" to the process of exploring a sale, the attorneys said, and could send the stock price into a tailspin, thus damaging shareholders and the school trust.
Only if the sale is approved by the boards of the trust company and school can the attorney general's office seek a review of the sale in court, trust and school attorneys said.
Mr. Fisher's spokesman, Sean Connolly, said the office would respond in court. The attorney general has opposed a sale, saying it could result in a loss of jobs and tax base and harm the business and social fabric in the town of Hershey, built by the company's founder.
Mr. Fisher asked for the temporary injunction Friday, saying he feared the sale process was moving so rapidly that his office would not have enough time to carry out its plans to prevent a possible transaction.
The attorney general is seeking to change the state law governing charitable trusts to require trustees to consider the interests of the community along with the interests of its beneficiary when selling a for-profit company.
Mr. Fisher also has sought a court review of the sale to ensure that it complies with state law and asked the court to force the company to disclose formal purchase offers.
The Hershey Trust announced last month that it had ordered Hershey Foods executives to seek bids on its controlling stake in the candy maker so that it could diversify the trust's $5.9 billion in holdings.
The trust, which owns 77 percent of the company's shareholder votes and 31 percent of common stock, said it was looking to protect its investments. About half the trust's assets are invested in the candy maker's stock, and board members say the trust could be hurt if the company's finances falter.
Hershey Trust President and Chief Executive Officer Robert C. Vowler has said that the trustees' intention to explore a sale has not wavered.
Mr. Fisher, whose office is charged with ensuring that Pennsylvania's charitable trusts are administered with the intent of their founding deeds, has said he believes the trust company should diversify its assets, but could do so without selling its entire interest in the company.

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