Bitter times for a sweet town

MILTON HERSHEY must be turning in his grave. The company he built into America's biggest chocolate maker, with such gooey offerings as Hershey's Kisses and Reese's Peanut Butter Cups, is trying to put itself up for sale. Ironically, it is the Hershey Trust, to which Milton handed his 77% voting stake in Hershey Foods in 1918 after the death of his wife, Kitty, that now seems determined to deliver his life's work into the hands of a competitor—perhaps even a foreign one.

The trust, though, is not really to blame. Its job is to finance a school for disadvantaged students set up by the childless Milton and Kitty, both devout Mennonites, and to safeguard an endowment that, at $5.4 billion, is now one of the richest educational institutions in America. Granted, that is a lot of money and explains why the students—who had to milk cows by hand until 1989—have a full-sized football stadium, marbled halls and chauffeurs to ferry them to class. But the trust wants to expand the number of students from 1,200 to 1,500, and it has a clear fiduciary duty to diversify its portfolio. The stake in Hershey is its only investment.

The trouble is that Hershey is not a normal company. Hershey the business and Hershey the town (in Pennsylvania) are intricately intertwined. The self-styled “sweetest place on earth” features streets such as Chocolate Avenue and Cocoa Avenue, and street lights shaped like the firm's Kisses. Milton Hershey designed everything in the town, from its parks to the sewerage systems, to improve his workers' lives. Today, Hershey employs half the town's 12,000 residents. Many managers, including a former chief executive, are graduates of the trust's school.

Hence the community's outrage at a possible change of ownership. Pennsylvania's attorney-general, Mike Fisher, is capitalising on local ire and taking the trust to court. Monty Stover, a 102-year-old former executive who knew Milton Hershey personally, is typical in his disdain for the planned sale: “Mr Hershey would never have considered this proposition. He would have said: ‘Gentlemen, you are wasting your time and mine. Goodbye.' ”

This means that Hershey will be tricky to integrate for any of its suitors, believed to include Nestlé, Philip Morris's Kraft subsidiary and Cadbury-Schweppes. Kraft may have the edge, not only in being American, but also because Hershey's current boss, Rick Lenny, used to be a senior executive at Nabisco, which Kraft swallowed in 2000. But then again, Nestlé already has a commercial relationship with Hershey, which distributes its KitKat bar in America. And the Swiss group has already weathered a similar “hostile” takeover: in 1988, it bought Rowntree, a British confectionery maker with strong links to its home town of York.

In the end, the resistance of the people of Hershey may not be enough to stop their company being snatched from under their noses. After all, if the taste of Hershey's chocolate—which, legend has it, is made with sour milk—is not enough to put off the bidders, what is?