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HERSHEY, Pa. -- The charitable trust that controls the Hershey Foods Corp. abandoned its plans to sell the famed candy company late last night even though it was on the verge of accepting a $12.5 billion cash-and-stock offer from the Wm. Wrigley Jr. Co., The New York Times reported.
After a 10-hour board meeting in Valley Forge, Pa., the trust said it had asked company executives to end their search for a buyer. Ten of the board's 17 members voted to halt the auction, a person close to the board told The Times. Hershey's board had planned to meet today to vote to accept Wrigley's offer, valued at $89 a share.
Wrigley's offer, 42 percent higher than Hershey's stock price when the company put it up for sale in July, had included several provisions to placate the close-knit community, including calling the new entity Wrigley Hershey and guaranteeing that the company's factories would be kept open.
A deal with Wrigley would have been a radical transaction, fundamentally reshaping the company, whose brands include Doublemint and Big Red chewing gum. A person close to the trust's board told The Times that the trustees had been overwhelmed by the outcry of protest from the community since the trust announced in July that it was considering selling its stake in Hershey Foods to diversify the trust's $5.9 billion base of assets.
"The trust board has rejected all the bids that have been received," Rick Kelly, a spokesman for the trust, confirmed. "It is asking the company to end the process of exploring a sale." He added, "This is the culmination of months and months of reviewing the diversification options."
The executives said that the trust had also received a joint-venture bid from Nestle and Cadbury Schweppes worth about $10.5 billion. Now the trust, which controls 77 percent of Hershey's voting stock and owns 31 percent of the common shares, plans to consider a stock buyback program, a person close to the company told The Times. The trust had argued that it needed to diversify its holdings to protect the financing for its main beneficiary, the Milton Hershey School, which educates and shelters nearly 1,300 students.
But Pennsylvania's attorney general, Mike Fisher, sought to block any sale in the Dauphin County Orphans Court, which oversees charitable trust activities, arguing that court approval was needed for any deal and contending that a sale could devastate the town, where about 6,200 people work for the company.
Two weeks ago, Judge Warren Morgan issued a temporary injunction to block the possible sale of the Hershey after Fisher argued that a sale would cause "irreparable harm" to the hometown of the candy maker, the nation's largest. Judge Morgan criticized the Hershey Trust for considering a sale in his 16-page opinion, saying that the trustees showed "a capriciousness that is an abuse of their discretion."
The trust appealed last week, arguing that the temporary injunction preventing the trust from selling the company should be overturned and contending that the injunction precludes the trustees from carrying out their obligation.