Hershey Trust Halts Auction Despite Offer of $12 Billion

he charitable trust that controls the Hershey Foods Corporation abandoned its auction late last night even though it was on the verge of accepting a $12.5 billion cash-and-stock offer from the Wm. Wrigley Jr. Company, executives close to the negotiations said.

After a 10-hour board meeting in the Philadelphia suburb of Valley Forge, the trust said it had asked company executives to end their search for a buyer. Ten of the board's 17 members voted to halt the auction, a person close to the board said.

News of the decision sent Hershey shares plunging in morning trading today, falling $9.66, or 13 percent, to $64.16.

Hershey's board had planned to meet today to vote to accept Wrigley's offer, valued at $89 a share, the executives said. Wrigley's offer, a 42 percent premium over Hershey's stock price before the company was put up for sale, had included several provisions, including a guarantee that the company's factories would be kept open, to make it more acceptable to local politicians and employees, who had objected to the sale, the executives said.

The combined company was going to be called Wrigley Hershey, they said. A deal with Wrigley would have been a radical transaction, fundamentally reshaping the company, whose brands include Doublemint and Big Red chewing gum.

A person close to the trust's board said that the trustees had been overwhelmed by the outcry of protest from the community since the trust announced in July that it was considering selling its stake in Hershey Foods to diversify the trust's $5.9 billion base of assets.

"The trust board has rejected all the bids that have been received," Rick Kelly, a spokesman for the trust, said after the board meeting last night. "It is asking the company to end the process of exploring a sale." He added, "This is the culmination of months and months of reviewing the diversification options."

The executives said that the trust had also received a second offer in the form of a joint bid from Nestlé and Cadbury Schweppes worth about $10.5 billion.

Now the trust, which controls 77 percent of Hershey's voting stock and owns 31 percent of the common shares, plans to consider a stock buyback program, a person close to the company said.

The trust had argued that it needed to diversify its holdings to protect the financing for its main beneficiary, the Milton Hershey School, which educates and shelters nearly 1,300 students.

But Pennsylvania's attorney general, Mike Fisher, sought to block any sale in the Dauphin County Orphans Court, which oversees charitable trust activities, arguing that court approval was needed for any deal and contending that a sale could devastate the town, where about 6,200 people work for the company.

Two weeks ago, Judge Warren Morgan issued a temporary injunction to block the possible sale of the Hershey after Mr. Fisher argued that a sale would cause "irreparable harm" to the hometown of the candy maker, the nation's largest. Judge Morgan criticized the Hershey Trust for considering a sale in his 16-page opinion, saying that the trustees showed "a capriciousness that is an abuse of their discretion."

The trust appealed last week, arguing that the temporary injunction preventing the trust from selling the company should be overturned and contending that the injunction prevents the trustees from carrying out their obligation.

Most legal experts had expected the decision to be overturned eventually. The injunction prevented the trust from entering into a binding arrangement but did not prevent the company from continuing the auction and making a preliminary deal.

Jack Stover, a lawyer for the trust, said in court that Mr. Fisher, who is running for governor, "has staged what we believe is an unprecedented attempt to exercise authority over a charitable trust in Pennsylvania."

Several trustees were particularly upset with Mr. Fisher, who recommended in December that the trust consider diversifying its assets only to become its most vocal critic after the auction was announced.

Good, I'm glad this happened. Had the trust sold out Hershey would have been dismantled, the jobs would have gone elsewhere, the school would have been closed and the town would have died. I saw this all too often in western PA in places like Johnstown, Indiana and Somerset.

you are probably right but I was glad to hear that at least an American company was in the bidding lead

There's been too many buyouts, lost jobs, towns devastated. I'm glad Hershey was ordered to stop. Kudos to Mike Fisher, he has my vote for governor.

The town of Hershey is a special place. It's "Chocolate Town". You visit the Hershey factory, the Hershey theme park, you drive away with boxes of chocolate. The sale of that company would have devastated the town's tourist industry.

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