Hershey Foods trust decides sale of candy maker not such a sweet deal after all

<br>KING OF PRUSSIA, Pa. (AP) _ Hershey Foods Corp. has been removed from the auction block by the charitable trust that controls the company, ending weeks of heated political opposition and legal wrangling

Wednesday, September 18th 2002, 12:00 am

By: News On 6

KING OF PRUSSIA, Pa. (AP) _ Hershey Foods Corp. has been removed from the auction block by the charitable trust that controls the company, ending weeks of heated political opposition and legal wrangling over the fate of the nation's largest candy maker.

Hershey had been expected to receive bids as high as $15 billion from food giants such as Kraft Foods and Wm. Wrigley Jr. Co. Experts said the board's decision was likely influenced by local leaders who argued a sale would have devastated the economy of Hershey, Pa., where the company was founded more than a century ago.

``They ran into so much turmoil,'' said Samuel Weaver, professor of finance at Lehigh University and former director of financial planning and analysis at Hershey Foods.

All 17 trustees met behind closed doors in a suburban Philadelphia hotel Tuesday to conduct regular board business and discuss the secretive process of seeking bids on its controlling stake in the company.

Late Tuesday, the trust issued a statement saying the sale plans were called off.

``The trust board has rejected all the bids that it received,'' Hershey Trust Co. spokesman Rick Kelly said, reading a statement from board members. ``It is asking the company to end the process of exploring the sale.''

The $5.9 billion trust, which controls 77 percent of the company's shareholder votes and 31 percent of its common stock, made the surprising announcement 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 selling the company would protect its investments because more than half the trust's assets are invested in the company's stock. Board members say the trust could be hurt if the company's finances falter during these rough economic times.

But the potential sale sparked protests from the public and politicians, who said the interests of the community would be pushed aside in any sale. Critics said a sale would trigger plant closings and layoffs.

In Hershey, residents have 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.

``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,'' August Memmi, a local political leader, said early Wednesday morning.

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

Indeed, a state judge granted an injunction on a sale, pending a Hershey Trust appeal. State Attorney General Mike Fisher had petitioned the judge to require the trust to seek court approval before it could sell the candy maker.

Even so, the board had been close to selling the company for $12.5 billion to Wrigley before changing its mind, The Wall Street Journal reported Wednesday, citing people familiar with the situation.

Kelly confirmed that Wrigley was a bidder for Hershey, but he would not provide more details on the matter.

Chocolate magnate Milton S. Hershey created the Hershey Chocolate Co. in 1894 as a subsidiary of his Lancaster Caramel Co. He later sold the caramel operation and began making chocolate in 1905 in what is now known as Hershey in the Chocolate Avenue plant that still stands today.

Many retirees and current employees live in the central Pennsylvania town of about 13,000, which is dominated by the buildings Hershey put up, including a hotel, an amusement park, botanic gardens and a theater.

The company is the maker of popular products such as the Hershey Chocolate bar, various Reese's products, Jolly Rancher candy and Twizzler licorice. The company had revenue of $4.6 billion last year.