June 16, 2008 / 12:57 PM / 10 years ago

Trust chairman sees change, but no sale, at Hershey

CHICAGO, June 16 (Reuters) - The chairman of the trust that has voting control over Hershey Co (HSY.N) said change is needed to boost the company’s performance and improve the largest U.S. chocolate maker’s position for long-term growth.

He also said the trust, which controls 78 percent of the voting stock in the company, hired merger-and-acquisition advisers more than a year ago to look at strategic options for Hershey.

"Transformational merger-and-acquisition transactions are but one of multiple strategic growth options the trust has been continually assessing, in coordination with the company board, as part of the trust's ongoing process and due diligence," Hershey Trust Chairman LeRoy Zimmerman wrote in an opinion piece published Sunday in the Harrisburg, Pennsylvania Patriot-News. (here?/base/opinion/1213383310262240.xml&coll=1#continue).

Zimmerman also reiterated that the Trust will not, and legally could not, give up its control of the company.

“The trust is committed to retaining its controlling interest in the company,” he wrote. “This is first and foremost a principle grounded in Milton Hershey’s philanthropic legacy. It also is rooted in constraints of Pennsylvania law and practical business imperatives. Simply put: We will not sell The Hershey Co.”

The Hershey Trust, which despite its control of the company holds shares representing only about 30 percent of the economic interest in Hershey Co, was established by Hershey founder Milton Hershey to serve as trustee for the boarding school that bears the Hershey name.

Last year the trust, unhappy with the financial performance of Hershey, arranged an overhaul of Hershey’s board.

In the wake of the agreement in April by Hershey rival Mars Inc to take over chewing gum maker Wm Wrigley Jr Co WWY.N, analysts have said Hershey needs to make some sort of alliance with another company to better compete with Mars, which will become the world’s largest candy company.

    But the Trust’s stance that it must maintain control of Hershey likely precludes a takeover by a company like Cadbury Plc CBRY.L. Instead, Hershey may need to opt for a joint venture with another company to help grow its international business, analysts said.

    Zimmerman’s remarks on Sunday appear to allow for such a move, though he said the question of what growth options the company will pursue is “an ongoing matter.”

    “There are meaningful options for dynamic long-term strategic growth that do not require selling the company. And it is toward those options that the trust and the company board are focused,” he wrote.

    Hershey shares closed at $38.33 on Monday on the New York Stock Exchange. The stock is down 2.72 percent this year. (Reporting by Brad Dorfman; editing by John Wallace)

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