Hershey sale put on hold - for now

- Last updated on GMT

Related tags: Hershey, Chocolate

The sale of the leading US chocolate bar maker Hershey Foods has
been put on hold in order to allow the courts to assess the likely
social and economic impact of the disposal. But will the
restrictions likely to be imposed on the sale put off potential
bidders?

A major battle was won yesterday in the war to keep Hershey American with the successful bid by Pennsylvania Attorney General Mike Fisher to postpone the proposed sale of the confectionery group until the court has had the opportunity to consider the economic and social issues raised by the potential sale.

Hershey was put up for sale earlier this year by the charitable trust which controls the business, but the likelihood of the company - an American institution and the country's biggest chocolate maker - passing into foreign hands had caused an uproar in the eponymous Pennsylvania town where the company is based. The trust has appealed against the judge's decision.

Fisher claimed that the community would suffer irreparable harm if a sale were reached. "I am pleased the judge has stopped this sale to give us a chance to raise these issues. We need to step back and take a hard look at how a sale of Hershey Foods would affect the Hershey community,"​ he said.

"There is no reason for the trust and its board to rush out and sell this company without allowing me to represent the public's interest and without allowing the court to determine how a sale could hurt this community."​ Fisher claimed that a sale could have been concluded within weeks if the injunction had not been granted.

The Attorney General argued that sale of Hershey could have "profoundly negative consequences for the Hershey community and surrounding areas, including the loss of jobs and related business and a decrease in the tax base"​ .

Fisher has also filed a petition seeking to force the Hershey Trust to reveal the details of any offers for the company and, if one of these offers is accepted, to force it to receive court approval before finalisation. The trust has until 9 September to reply.

The main reason for the furore over the proposed sale is that the leading contenders to buy the business are European. Nestle, the Swiss-based company, is thought to be the front runner, although it has remained downbeat about the potential sale, arguing that competition concerns would make it difficult for the company to proceed.

The Swiss group has also been linked to a joint bid for Hershey with UK rival Cadbury Schweppes - a deal which could get round some of these competition concerns. Both companies have refused to comment on the rumours, but such an agreement seems unlikely since the rights to its own brands distributed by Hershey in the US - the principal motivation behind a joint bid for the UK group - will in any case revert to Cadbury in the event of a sale.

US groups Kraft and Wrigley have also been linked to Hershey, but any of the potential bidders is now likely to think twice given the restraints expected to be imposed on such a deal. Perhaps more likely is the resurrection of the previously rejected offer from Hershey Foods to buy back some of the shares in the company held by the trust.

Related topics: Manufacturers, Hershey

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