CHICAGO The trust that has a controlling stake in chocolate maker Hershey Co (HSY.N) on Sunday forced a sweeping overhaul of the company's board amid dissatisfaction with the company's recent results.
The Hershey Trust, which controls about 78 percent of Hershey's voting shares, asked six of the company's 11 directors to resign. Two others also chose to resign, the company said.
The maker of Hershey Kisses and Reese's Pieces has struggled in the past two years with rising costs and tough competition from M&Ms maker Masterfoods USA, a unit of private Mars Inc. Last month, Hershey posted a 66 percent drop in quarterly profit.
The trust "has made clear it has not been satisfied with recent results," trust chairman LeRoy Zimmerman said in a statement.
The move comes weeks after Chief Executive Richard Lenny decided to leave the company, with the Wall Street Journal reporting he had differences with the trust and could not run the business with the autonomy he wanted.
The Journal later reported that members of the trust met with Cadbury Schweppes Plc CBRY.L, without Lenny, to discuss a possible merger. The trust has declined comment on the report. Cadbury is splitting up its candy and drinks businesses.
New Hershey board members put in place on Sunday include Stone Point Capital CEO Charles Davis, a veteran of Goldman Sachs where he was head of Investment Banking Services, and Edward Kelly, managing director of private equity firm The Carlyle Group.
The company said Kenneth Wolfe would serve as non-executive chairman, effective January 1. Wolfe served for eight years as chairman and CEO of Hershey, retiring at end-2001.
Chief Financial Officer David West, who was named to replace Lenny as chief executive, will assume that role December 1.
CHANGE WAS COMING
The trust first voiced its displeasure with Hershey's results in a statement issued October 10. At that time, the trust was already in the process of seeking new members to serve on Hershey's board, a spokesman for the trust said on Sunday.
"This has been unfolding for some time," Tim Reeves said.
The Trust, established by Hershey founder Milton Hershey to serve as trustee for the boarding school that bears his name, also holds about 30 percent of the economic interest.
The trust has said it is required by Pennsylvania law to maintain voting control over Hershey. The trust also says it wants Hershey to pursue opportunities in the United States.
But analysts have questioned whether Hershey can strike the type of deal it needs to significantly grow internationally -- such as a merger with Cadbury -- in such a way that the trust would retain control.
Among the board members who resigned was Robert Campbell, who had been designated to become non-executive chairman on January 1.
Hershey closed on Friday at $41.04 in New York. Hershey shares are down 17.5 percent for the year, compared with a 1.33 percent rise on the Standard & Poor's packaged foods index
(Additional reporting by Franklin Paul; Editing by Ian Geoghegan)