Pa. Appeals Court Mulls Hershey Ruling

September 12, 2002 ( - The controversial sale of Hershey Foods is temporarily on hold while a Pennsylvania appeals court mulls over legal issues raised by both sides.

After listening to the lawyers during oral arguments, the seven-member Pennsylvania Commonwealth Court in Harrisburg issued no immediate ruling on whether to cancel a lower court injunction blocking Hershey’s owner from selling the company, a Reuters news report said.

The injunction stopping a sale for now was issued last week by the Dauphin County Orphans Court in Harrisburg.

The Pennsylvania Attorney General has argued a sale of the company, which makes well-known candies such as Hershey’s bars, Kisses and Reese’s peanut butter cups, could lead to plant closings and job losses in the town of Hershey and the surrounding southern Pennsylvania community.

The Hershey Trust, which controls 77% of the company’s shareholder voting rights, said in late July that it would consider a buyer for Hershey as a means of diversifying its holdings. Fifty-eight percent of its $5.4 billion in assets are tied up in Hershey stock.

Fiduciary “Block”

Jack Stover, the trust’s lead attorney, argued that efforts to bar the trust from considering a sale would limit its fiduciary responsibility to its beneficiary, the Milton Hershey School. The school was established by Hershey founder Milton Hershey to assist underprivileged children.

Defending the lower court’s injunction was Jerry Pappert, Pennsylvania’s deputy attorney general, who argued that the trust’s fiduciary responsibility is not just to the school, but to the public at large.

Adding to the trust’s difficulties is the Milton Hershey School Alumni Association, which has asked the lower court for legal standing to help block the sale. The group has also called for the ouster of the trust’s board.

Wall Street sees Food giants Nestle SA , Cadbury Schweppes Plc and Kraft Foods Inc. as potential bidders for the company.  Cash-rich Nestle, the No. 3 US chocolate maker, continues to be pegged by analysts and bankers as the most likely buyer.