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How sweet it is
©Associated Press HARRISBURG, Pa. -- No longer for sale, Hershey Foods Corp. saw its stock price drop sharply on Wednesday as speculation turned to how the charitable trust that controls the candy company might now try to diversify its assets. "We will continue to explore alternatives," Robert Vowler, the trust's chairman and chief executive, said Wednesday, less than 12 hours after board members voted 10-7 against selling Hershey Foods. Analysts said the Hershey Trust Co. could sell a chunk of its 43-million Hershey Foods shares to the company or place them on the open market. Whatever path the trust takes, Legg Mason analyst George Askew cautioned investors that shares of Hershey Foods could still be affected since more than half of the trust's $5.9-billion fund is invested in Hershey Foods stock. Hershey Foods said in a statement Wednesday that it had not been approached by the trust about purchasing stock. While the trust's decision not to sell was cheered by Hershey residents who feared job losses and other negative economic consequences, Wall Street reacted unkindly. On the New York Stock Exchange, shares of Hershey Foods plummeted $8.81, or nearly 12 percent, to $65 -- roughly their value before the candymaker was put on the auction block. When the trust announced July 25 it was exploring a sale, Hershey Foods' stock rose in one day from $62.50 to $79.49. At the time, analysts said the sale could fetch as much as $15-billion. Hershey's is the nation's largest candymaker, with sales of $4.6-billion in 2001 and recognizable brands such as Hershey's Kisses and Reese's products. In choosing not to sell late Tuesday, the trustees turned down two bids: Wm. Wrigley Jr. Co. offered to pay $12.5-billion in cash and stock, while Nestle and Cadbury made a joint $10.5-billion cash offer. That brought an abrupt ending to 55 days of Wall Street speculation about which company would win the Hershey Foods sweepstakes and soothed the anxiety of Hershey residents who feared the loss of a chocolate company around which their community has revolved for a century. "The only thing I could see was the deterioration of the town if the company was sold," said Shirley Reale, who was born in Hershey and has breathed the cocoa-scented air wafting from the company's main plant on Chocolate Avenue for a lifetime. "That's all I could think of, that I'd miss that smell," Reale said. The potential sale has brought legal challenges from the community. On Wednesday morning, the state Commonwealth Court upheld a lower court's temporary injunction against a sale. "It's the best news we've heard," said Herman Good, a 75-year-old Hershey Foods retiree who spent 43 years in the company's wrapping department. Not so for Chicago-based Wrigley, which called the decision "disappointing" and said in a statement its offer had been a "thorough, thoughtful, fairly valued proposal." But Vowler said the Wrigley offer would not have achieved the diversification of assets the board was seeking. The Nestle-Cadbury offer was too low, he added, and did not include conditions that the trust deemed beneficial to the Hershey community and the school for disadvantaged children that is the trust's ultimate beneficiary. The trust had pursued the sale as a way 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. With that in mind, some community organizers are still nervous about what the trust will do. Kathy Taylor, a local lawyer who helped organize the grass-roots campaign against the sale, said that although community members were feeling relieved now, they remained concerned that the board might revisit the idea of a sale. "How long this particular board of trustees will go before they try this again, I don't know," she said. Taylor said her next goal is to have the board replaced, "not in a punitive way, but as a pre-emptive measure."
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From the Times Business report
From the AP
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