- The Washington Times - Thursday, September 19, 2002

KING OF PRUSSIA, Pa. (AP) The chairman of the charitable trust that controls Hershey Foods Corp. said yesterday that the nation's largest candy maker was taken off the auction block because two offers for the company including one for as much as $12.5 billion were unsatisfactory.

The decision late Tuesday followed weeks of heated political opposition and legal wrangling over the fate of Hershey Foods, which was founded more than a century ago and is an important part of the economy near Hershey in central Pennsylvania, where it makes it home.

Hershey Foods' shares tumbled in morning trading yesterday after trading higher since late July in anticipation of an auction that some analysts said could attract bids of as much as $15 billion.

But Robert C. Vowler, the Hershey Trust Co. chairman and chief executive, said yesterday the board had received two bids on the company one from Wm. Wrigley Jr. Co. to pay $12.5 billion, or $89 a share, and a joint offer from Europe's Nestle and Cadbury for $10.5 billion, or $75 a share.

He said neither offer was satisfactory and that the trust's board voted 10-7 late Tuesday to abandon the sale of the company. "Sale talk is over," Mr. Vowler told a news conference yesterday.

The Wrigley offer was a cash-and-stock deal, which would not have achieved the diversification of its $5.9 billion in assets that the board was seeking, Mr. Vowler said.

The cash joint offer from Nestle and Cadbury was too low and did not include conditions that the trust deemed beneficial to the Hershey community, Mr. Vowler said.

In a statement, Chicago-based Wrigley called the decision disappointing and said its offer had been a "thorough, thoughtful, fairly valued proposal." But it said it respected the decision and would move on.

In afternoon trading on the New York Stock Exchange, Hershey shares sank 13.1 percent, or $9.66 a share, to $64.15. Hershey shares had been trading at $62.50 a share before it was disclosed the trust was exploring a sale in July.

Mr. Vowler said the amount of the offers and not pressure from elected officials and the community were behind the trust's decision.

While action in court against the company by the state attorney general was "in the back of people's minds," the trustees' decision was based on financial considerations, Mr. Vowler said.

"We had to be very mindful that we were under a temporary injunction," he said.

Yesterday, the state Commonwealth Court upheld a lower court's temporary injunction against a sale.

State Attorney General Mike Fisher had sought the injunction, saying that he feared plant closings and massive layoffs if a sale went through. A judge considered his petition, and ordered the Hershey Trust Co. to seek court approval of any sale.

"I think they understood how opposed the community was to this, and I think they also understood we were prepared to fight them every step of the way," Mr. Fisher said, adding, "It just wouldn't have been right to have Hersheypark called Wrigley Field."

For weeks, the trust had been under fire from Pennsylvania officials concerned about the social and economic impact of any sale. Many said the interests of the community that bears the name of company founder Milton Hershey would be pushed aside.

"I said at one point that it was the soul of this community, and I, for one, am pleased that Hershey has taken another look at this," said August Memmi, the chairman of the board of supervisors of Derry Township, the political subdivision that includes the village of Hershey.

In Hershey, residents circulated petitions, staged rallies and posted signs on front lawns to dissuade the trustees, most of whom do not live locally, from selling the company.

"We dreaded the dismantlement of Hershey Foods. This would have been a devastating blow for central Pennsylvania," said Robert Feaser, the business manager of Chocolate Workers Local 464, which staffs two of the three chocolate factories in Hershey. "I guess we finally wore them out and brought them down."

The trust company, which controls 77 percent of the company's shareholder votes and 31 percent of its common stock, announced July 25 that it had ordered Hershey Foods executives to seek bids on its stake.

The trust, whose sole beneficiary is the Milton Hershey School for disadvantaged children, said it was looking to protect its investments. More than half the trust's assets are invested in the stock, and board members say the trust could be hurt if the company's finances falter.

News of the possible sale had surprised some analysts, who thought Hershey's profitability and its close relationship with the town, the trust and the school made it untouchable.

The company, which had $4.6 billion in sales last year, has 12 brands that bring in $100 million in annual sales.


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