Case 44

1726 words 7 pages
Case #44

Synopsis and Objectives

The proposed sale of Hershey Foods Corporation (HFC) during the summer of 2002 captured headlines and imaginations. After all, Hershey was an American icon, and when the company’s largest shareholder, the Hershey Trust Company (HSY), asked HFC management to explore a sale, the story drew national and international attention. The company’s unusual governance structure put the Hershey Trust’s board in the difficult position of making both an economic and a governance decision. On the one hand, the board faced a challenging economic decision that centered on determining whether the solicited bids provided a fair premium for HFC shareholders. On the other hand, the governance decision required the
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* Ten board members, including seven who voted to sell the trust’s holdings in HFC, departed; four new members added. * Six of the eleven board members were residents of central Pennsylvania. * HFC chairperson and CEO Richard Lenny was appointed to the HTC board; all subsequent HFC CEOs will also serve on the board of the trust.

Hershey Foods Corporation

* One HFC board member retired, and another, Robert J. Hillier, was ousted from both the HFC and HSY boards. * Two new outside directors were elected by shareholders in April 2003. * Hershey completed a major corporate reorganization, which included 750 layoffs, 600 early retirements, and four plant closings. * In the third quarter of 2001, Hershey booked $17.3 million in charges related to the proposed sale of the company. * At the beginning of the sale process, Hershey’s stock rose 25%, to $78.30, but dropped sharply when the deals fell through. One month later (October 17), HSY shares traded at $62.10. * In December 2002, HSY announced a plan to buy back $500 million worth of shares, but it would not pay a premium on them. * HSY’s 2002 profits rose 11.6% from 2001, and market share hovered around 30%. * Chairperson and CEO Richard Lenny announced plans to keep the door open to a joint venture in order to increase sales abroad. International sales accounted


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