USATODAY.com - Hershey not for sale, board says

KING OF PRUSSIA, Pa. (AP) — Hershey Foods (HSY) has been taken off 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's shares that had risen in anticipation of a buyout tumbled Wednesday.

Hershey had been expected to receive bids as high as $15 billion from food giants such as Kraft Foods and Wm. Wrigley Jr. 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.

The highest offer — more than $12 billion — came from Wrigley, the world's No. 1 chewing gum maker, said Rick Kelly, spokesman for the trust.

Robert Vowler, president and chief executive of the trust, told a press conference that the Wrigley bid of $89 a share was rejected because the offer was in cash and stock and would have complicated the trust's diversification efforts.

The other offer was a joint bid from Swiss food titan Nestle and British drinks and confectionary company Cadbury Schweppes, which offered $75 cash per share, or about $10.2 billion. The board rejected that offer as too low, Vowler said.

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," Kelly said, reading a statement from board members. "It is asking the company to end the process of exploring the sale."

Kelly said Wednesday that the trust board voted 10-7 to abandon the sale of the company.

The $5.9 billion trust, which controls 77% of the company's shareholder votes and 31% 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.

"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. "I guess we finally wore them out and brought them down."

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.

Chocolate magnate Milton Hershey created Hershey Chocolate in 1894 as a subsidiary of his Lancaster Caramel. 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.