Dauphin County Senior Judge Warren G. Morgan yesterday [Wednesday] issued an injunction to halt the sale of US confectionery giant Hershey Foods until the court has an opportunity to consider the economic and social issues raised by the Attorney General Mike Fisher.
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Fisher insists that any public sale of Hershey would leave its hometown community in Harrisburg, Pennsylvania, to suffer irreparable harm with layoffs amongst Hershey’s 6,200 employees. It would also mean a decrease in the tax base. He filed for an injunction on 23 August in Dauphin County Orphans Court, following reports that a sale could be reached within weeks as potential buyers were already touring the company’s plants in preparation for making an offer.
This decision is unlikely to block a sale in the long term, but until Judge Morgan can hold further hearings, the sales process will be prolonged.
Fisher welcomed the judgement, however: “We need to step back and take a hard look at how a sale of Hershey Foods would affect the Hershey community. There is no reason for the [charitable Hershey] Trust [which controls the firm] 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.”
The Hershey Trust responded however by ordering Hershey executives to continue to seek bids, and filed its notice to appeal Judge Morgan’s decision in the state’s Commonwealth Court.
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By GlobalDataThe Trust essentially manages the US$5.9bn private wealth of Milton Hershey, who bequeathed all of the stock in his chocolate company to the Milton Hershey School in 1918, and died childless in 1945. It announced in July that it would explore the possible sale of the firm as a means of diversifying its assets.
Fisher said that he is “hopeful that the trustees will use this [injunction] order to reconsider their position to sell Hershey Foods”.
Lawyers for the Hershey Trust and the Milton Hershey School insist however that Fisher has gone beyond the law in his bid to stop a possible sale, and that he has still not made it clear how a sale would damage the local economy.
Hershey is expected to raise as much as US$15bn in a public sale. Potential bidders include Nestlé, Philip Morris Cos’ Kraft Foods subsidiary and UK confectioner Cadbury Schweppes, with Wrigley also in the frame.
A Nestlé spokesman, Francois Perroud, told Dow Jones “we have no comment to make” in light of the injunction, but he added that the Swiss behemoth is still keen to own the licence to market the Kit Kat brand in the US, which currently belongs to Hershey.
“Our attitude towards the Kit Kat brand hasn’t changed,” Perroud continued.
