Choclate Wars: Hershey's Trust May Make a Play to Buy Cadbury
The charitable trust that owns Hershey Co. is urging
has decided that it wants to go mano a mano with Kraft Foods and battle it out for control of Cadbury PLC. Kraft is in the middle of attempting a hostile takeover of Cadbury, but the offer price is so low that shareholders want nothing to do with it -- so far.
The Hershey's Trust has reversed its position that expansion is bad and has decided that it must grow so that the trust can continue its charitable activities, such as funding a school for disadvantaged children. It had always opposed the idea of a merger before, but in the current economy it believes that it's time to look at expansion.
It is now urging Hershey's chief executive, David West, to make a competing offer to the $16.5 billion bid Kraft made earlier this month for Cadbury, people familiar with the matter say.
A bid, if one emerges, wouldn't be ready for at least two weeks, and the potential terms remain in flux.
One possible scenario, said these people, would include at least $10 billion in cash from Hershey, plus $2 billion in new Hershey shares. A third component of this package would be an additional $3 billion to $5 billion in cash from rich investors in exchange for equity in Hershey, these people said.
The investors are being courted by Hershey adviser Byron Trott, a former Goldman Sachs banker known for his close relationships with Warren Buffett and other rich investors.
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Mr. Hershey was considered as much a philanthropist as an entrepreneur. He held the view that businesses and their leaders were morally obligated to share their wealth with society. So as he built the chocolate company he raised a town as well -- erecting a bank, a department store, churches, golf courses, a zoo and a trolley system.
In 1909, he and his wife, Catherine, founded a school for orphan boys, now called the Milton Hershey School. He later transferred his wealth, including his company ownership, to Hershey Trust Co., which administers the school's trust.
If Hershey's does buy Cadbury it will be interesting to see how that all plays out. Kraft Foods is no doubt quite unhappy at the prospect of a new bidder in the game.
