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HARRISBURG, Pa. -- The state of Pennsylvania yesterday went to court to try to block any attempt by the charitable trust that controls Hershey Foods Corp. to sell the chocolate maker, warning that such a deal could lead to major layoffs in the town that bears the company's name.
Lawyers for the $5.9 billion Hershey Trust Co., which benefits a school for disadvantaged children, argued that the state lacks the authority to stop the sale of the nation's largest candy maker, the Associated Press reported.
The trust controls 77 percent of Hershey Foods' shareholder votes and 31 percent of its common stock. In July it announced that it had ordered company executives to seek bids for Hershey. Analysts say the price could be as high as $15 billion.
Nestle, widely regarded as the front-runner to buy the famed maker of Hershey's Kisses and Reese's Peanut Butter Cups, declined to comment on the court proceedings, the report said.
Pennsylvania Attorney General Mike Fisher sued to block any sale, contending that the loss of jobs and tax revenue could devastate the Hershey area, where about 6,200 people work for the company.
Lawyers for the Hershey Trust and the Milton Hershey School have contended that Fisher has gone beyond the reach of the law to stop the sale, and has failed to show that it would damage the community.
Jack Stover, an attorney for the trust and the school, the trust's only beneficiary, displayed a chart showing that 58.6 percent of the Milton Hershey Trust's assets are invested in Hershey Foods stock and said that diversifying the assets is a "legitimate, prudent purpose" that the trustees have every legal right to carry out, according to the AP.
Former Hershey Foods chief executive Richard Zimmerman, testifying as a witness for the state, said that a buyer would likely slash jobs in Hershey to help make up for the cost of buying the company.
Shares of Nestle jumped 2.8 percent this morning as investors bet that the court would successfully intervene against the sale, reducing the odds that Nestle would overpay for Hershey. The company's current bid stands at $11.5 billion.