Hershey's Trust Sours on Chocolate Maker

| About: The Hershey (HSY)

Hershey's Trust, which holds about one-third of the equity but controls about two-thirds of the vote in the largest chocolate maker in the U.S., said Monday it was "not satisfied" with Hershey Co.'s performance and was "actively engaged in an ongoing process" to improve it. In a statement obtained by the Wall Street Journal, the Trust noted that the candy maker had lost some $1B in market value during its current period of unsatisfactory performance, but that it nevertheless, intends to maintain its controlling interest. It believes, it said, that "the long-term prosperity of the Company requires the Company Board and its management to build on its strong U.S. position by aggressively pursuing strategies for domestic and international growth." Among the processes it apparently is pursuing is a merger with Cadbury Schweppes plc. Hershey is currently licensed to distribute Cadbury brands in the U.S. and Cadbury has said a combination would make sense. People familiar with the situation told the Journal the Trust last month met with the U.K. confectioner to discuss a possible deal, but that nothing has yet come out of the meeting. Trouble has been brewing for some five years since 2002, when the Trust forced Hershey CEO Richard Lenny to put the company up for sale, but the process was called off amid pressure from the local community despite a joint $10.5B bid from Cadbury and Nestle SA and a $12.5B offer from gum maker Wm. Wrigley Jr. Co. Last week, Lenny abruptly announce that he would retire at year-end, just days after he stepped down from a post at the Trust.

Sources: Hershey Trust Statement, Wall Street Journal, Financial Times
Commentary: Hershey: Sweet Dividend Increases, Sour Equity Growth RateHershey Continues To Melt: Time For a Chocolate-Filled Shakeup
Stocks/ETFs to watch: HSY.Competitors: CSG, WWY
Earnings call transcript: Hershey Co. Q2 2007

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