Chocolate stays in Chocolatetown

In a shocking development overnight on Tuesday Sept. 17 the Milton Hershey School Trust decided not to sell the world famous candy company, Hershey Foods.

The 17-member trust board announced nearly two months ago that they would begin accepting bids for a possible sale of the plant. Even though the company opposed the sale, it was still placed on the market after its alternative proposal to the trust board was rejected. Bids soared as high as $15 billion from corporations such as Kraft Foods, Nestlé and Wm. Wrigley Jr. Co.

The announcement of the intention to sell came as a shock to residents and employees in the company town. The trust owns more than one-third of Hershey’s stock, but heavily exercises its influence with nearly 77 percent of the voting power. The trust’s reason for selling the company was said to be to "diversify its holdings," to ensure the future for its sole beneficiary, the Milton S. Hershey School, established to provide education for more than 1,200 needy children.

Critics of the sale, however, pointed out that the $100 million endowed school has enough funds in reserve to function through 2006.

The sale would have meant huge losses for the town of Hershey and surrounding communities with layoff numbers in the thousands. It would have also caused a serious blow to the local economy for many local businesses and the tax revenue the company generated.

Earlier this month, Judge Warren Morgan of Pennsylvania’s Dauphin County Orphan’s Court had granted a request made by state Attorney General Mike Fisher for a temporary restraining order to halt the sale. Because of this, Hershey stock tumbled four percent to $72.51 from the $85 it fetched once sale talks began.

The battle was still not over because a Pennsylvania appeals court adjourned on Sept. 11, failing to make a decision to issue an injunction to stop the sale.

Last Tuesday, board members spent 10 grueling hours in a Valley Forge conference room and announced their decision not to sell just before midnight. The final decision was 10 to 7 in favor of not selling. According to trust chairman Robert Vowler, the stock-and-cash deal offered by Wrigley didn’t offer enough diversification of the trusts assets, and the all-cash offers from Nestle and Cadbury were too low and failed to offer guarantees to protect the community from plant closings and layoffs.

Now, the trust has decided not to sell Hershey Foods without first notifying Fisher's office and seeking court approval for a sale. Fisher also contacted the trust to make sure that the board's Sept. 17 decision was absolute. Members of the community recently presented Fisher with a petition of 6,500 signatures in an effort to oust the Hershey Trust board members who were considering the sale of the company.

According to Lehigh University professor Samuel Weaver, a former finance director for Hershey, "This should end a very ugly chapter, but it’s very emabarrassing for the trust and their advisors to initiate such a damaging process and not get a deal."