Preview Newsletter
Hershey Media Report 7/1/2016
-
Prospective Hershey Suitors Face Numerous Unusual Hurdles
Jul 1, 2016 | The Wall Street Journal
By ANNIE GASPARRO and JULIE JARGON
Snack maker Mondelez International Inc. or any other potential bidder for Hershey Co. is up against not only a board that indicated it doesn’t want to sell, but a secretive, controlling shareholder—and the state’s top law officer. -
Mondelez's bid may find gaps in Hershey's armor
Jul 1, 2016 | Reuters
By Lauren Hirsch and Lisa Baertlein
An elaborate structure put in place to preserve Hershey Co's ties to its local community has been roiled by scandal, creating an opening that Mondelez International Inc seized on to launch a $23 billion for the chocolate giant. -
Hershey looks too sweet for Mondelez to resist
Jul 1, 2016 | Financial Times
By Lindsay Whipp in Chicago, Scheherazade Daneshkhu and Arash Massoudi in London
Activist investor Nelson Peltz was positively scathing when he first took aim at one of the US’s most prominent confectionery companies. “The name Mondelez, I hate. It sounds like a disease,” he said in 2013. -
Hershey board rejects takeover bid from rival Mondelez
Jul 1, 2016 | The Village Sun Times
By Max Garcia
Mondelez's takeover bid for Hershey, which had a $21 billion market value on Thursday, could've been a blockbuster move bringing together the world's second- (Mondelez) and fifth-largest (Hershey) confectionery makers together, the WSJ reports. These two companies have the top five sweets in the whole world and Mondelez is desperate to expand its global footprint. -
Is A Hershey – Mondelez Merger Sweet Enough?
Jul 1, 2016 | Value Walk
By Michelle Jones
Hershey shares pulled back on Friday after the company said it had rejected a buyout bid from Mondelez International. The bid was worth $23 billion or $107 per share. Analysts were quick to issue reports on the proposal, with topics ranging from what Mondelez’s motives might be in making an offer to whether a deal might actually come out of the rejected bid. -
More Squawk from Jim Cramer: Mondelez Offer for Hershey (HSY) ‘Way Too Low’
Jul 1, 2016 | TheStreet
By Kaya Yurieff
Shares of Hershey (HSY) are down 1.74% to $111.51 on Friday afternoon after the chocolate giant rejected a $23 billion takeover offer from snack food company Mondelez (MDLZ) yesterday. -
Hershey: Can Mondelez Make Its Deal Dream a Reality?
Jul 1, 2016 | Barrons
By Ben Levisohn
Credit Suisse analyst Robert Moskow and team consider what Mondelez International (MDLZ) would need to do in order to make a purchase of Hershey (HSY) a reality: -
RBC Capital Provides Insight on Mondelez Rejected Takeover Bid for Hershey Co
Jul 1, 2016 | Bidness ETC
Late yesterday, Hershey Co. (NYSE:HSY) rejected Mondelez International’s bid to acquire it in in a cash-plus-stock deal. The acquirer also offered to make Hershey, Pennsylvania its new global headquarters, along with a promise to protect all the jobs, in an attempt to win the confidence of Hershey Trust Company, which has over 81% of the voting power. RBC capital believes that the proposal could have provided greater cost-cutting incentives at the target company. -
Did the Hershey School reject students for depression? Two suits say yes
Jul 1, 2016 | Philadelphia Inquirer
By Bob Fernandez
Lawyers for two former students, including a 14-year-old girl who committed suicide, sued the $12.3 billion Milton Hershey School on Thursday in federal court here, alleging that they were expelled for depression and having suicidal thoughts. -
Is Milton Hershey School to Blame for Abbie Bartels’ Suicide?
Jul 1, 2016 | Philadelphia Magazine
By Victor Fiorillo
It has been three years since 14-year-old Pennsylvania girl Abbie Bartels died by suicide, and now her parents have filed a lawsuit against the prestigious Milton Hershey School in Hershey, Pennsylvania, accusing the boarding school of causing her death by expelling Bartels and barring her from eighth grade graduation after she expressed a desire to harm herself.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Traditional Media
National Broadcast News
Full Text of Stories Below
-
Prospective Hershey Suitors Face Numerous Unusual Hurdles
Jul 1, 2016 | The Wall Street Journal
By ANNIE GASPARRO and JULIE JARGON
Snack maker Mondelez International Inc. or any other potential bidder for Hershey Co. is up against not only a board that indicated it doesn’t want to sell, but a secretive, controlling shareholder—and the state’s top law officer.
Mondelez, whose roughly $23 billion bid was quickly rebuffed this week, is expected to continue fighting for a union. The company said Friday it handles situations such as this “through private communications between companies.”
But, if the company continues its pursuit, it will have to contend with an unusual number of additional legal and political hurdles unique to deal making with the famous chocolate maker.
No deal would happen without the blessing of Hershey Trust Co., which controls 81% of the company’s voting power and 8.4% of its common stock.
Set up in 1905 by chocolate icon Milton Hershey, the trust’s mission is to make decisions based on the potential impact to the Milton Hershey School for underprivileged children, and the community of Hershey, Pa.—which had protested selling the company in the past.
Any sale would also need final approval of Pennsylvania’s attorney general, who—under an unusual 2002 state law—has the power to countermand the trust, and has done so in the past.
Yet another challenge is the current political turmoil in the state, where Attorney GeneralKathleen Kane is riding out the last few months of her first term, having been stripped of her law license after being accused of leaking confidential information and lying about it. Ms. Kane has said the charges against her are part of a conspiracy involving former state prosecutors she was investigating.
Other food makers, including Kellogg Co. and Campbell Soup Co., have significant ownership by family and trusts, but Hershey is further subject to a state law that requires the top law-enforcement official to green light the sale of any company controlled by a charitable trust.
The law is a “public policy tragedy,” according to Robert Sitkoff, a Harvard Law School professor who has studied the trust. He said that diversifying the trust’s portfolio would benefit the school and community but said he thinks any deal would face difficulties.
Others, including a former Pennsylvania attorney general, said a sale would hurt the community by resulting in job losses and other adverse economic and social impacts.
“Predicting and trying to rationalize the Trust’s behavior has always been a tricky exercise,” said Susquehanna analyst Pablo Zuanic.
A spokesman for the Hershey Trust board said it wouldn’t comment on whether it supports selling the company, but three trust board members have seats on Hershey’s board, which unanimously voted against the Mondelez offer of $107 a share on Thursday.
The trust itself is juggling other problems. A continuing investigation by the attorney general’s office into alleged overpayment of directors and conflicts of interest has led to several directors resigning. The trust has said it is cooperating with the probe.
The fate of the 2002 deal talks is instructive. Hershey called off a sale to chewing-gum maker Wm. Wrigley Jr. Co., now a unit of the privately held Mars Inc., at the final hour, after facing resistance from the attorney general’s office, which obtained an injunction granted by Pennsylvania Orphans’ Court, saying a sale would hurt the community.
Less than two months after the scuttled deal, the Pennsylvania governor signed an amendment to a statute requiring the attorney general to approve the sale of any company controlled by a charitable trust.
A spokesperson for the attorney general’s office said this week that it would need to review the details of any offers to buy Hershey before determining if it would be in the best interest of the school.
-
Mondelez's bid may find gaps in Hershey's armor
Jul 1, 2016 | Reuters
By Lauren Hirsch and Lisa Baertlein
An elaborate structure put in place to preserve Hershey Co's ties to its local community has been roiled by scandal, creating an opening that Mondelez International Inc seized on to launch a $23 billion for the chocolate giant.
While Hershey's board of directors unanimously rejected Mondelez's offer on Thursday, its once impenetrable defenses are now looking weaker due to an investigation into the charitable trust that controls it, as well as controversy facing the Pennsylvania Attorney General, who also has a say in any change in Hershey Co's ownership.
The Hershey Trust, set up by the company's eponymous founder a century ago, holds 81 percent of the company's voting stock and without its approval, a sale is impossible.
The Trust has blocked Hershey deals in the past, including a 2002 takeover bid for the company, which makes Hershey's Kisses and Reese's Peanut Butter Cups.
But the Trust set up over 100 years ago to help underprivileged children, is now being investigated by Pennsylvania Attorney General's office for how much it spends and how long its directors has served for.
The AG's office has called for the resignation of three of its longest tenured employees. Separately, this year, the Trust fired its executive vice president, after he pled guilty to wire fraud associated with campaign contributions.
The Trust is one of Pennsylvania's wealthiest charities. Its shares in the chocolate giant have created a $12 billion endowment that helps to fund a school as well as an amusement park and resort in Hershey, a small town about 100 miles (160 km) west of Philadelphia.
Another hurdle to the Mondelez bid is the Pennsylvania Attorney General's office, which has the right to intervene in a Hershey deal if it deems it "unnecessary for the future economic viability of the company."
The current AG in Pennsylvania, Kathleen Kane, is set to go on trial next month for allegedly leaking lewd and bigoted emails between prosecutors and judges to a reporter. The scandal has been dubbed "Porngate" by local media.
Joel Glenn Brenner, author of the 2000 book 'The Emperors of Chocolate: Inside the Secret World of Hershey and Mars', said that the troubles facing the Trust and Kane could make them less resolute in opposing a deal.
"This time, what makes it different is these investigations, the chaos at the attorney general's office, and the fact that there has been a turnover at the trust," he said.
The fiduciary duty of the Trust, laid out in a 1909 deed, is to support the Milton Hershey School, an establishment created for children from low-income families, not Hershey's shareholders.
In 2002, when Wm. Wrigley Jr. wanted to buy Hershey for $12.5 billion, the Trust called off the sale at the last minute. It also thwarted a deal in 2007, when confectionary company Cadbury entered into conversations about a tie-up and, in 2010, the Trust prevented Hershey from bidding for Cadbury.
The Pennsylvania AG's office also helped pull the plug on the Wrigley deal in 2002.
The Trust declined to comment on the offer for Mondelez, which would create the world's largest confectioner, but said it hoped to address the AG's concerns.
"We expect to appropriately resolve outstanding concerns the Attorney General's Office has concerning the interpretation of the 1909 deed of Milton S. Hershey, where he outlined his wishes to provide a funding mechanism to provide the Milton Hershey School with sustainable financial resources in perpetuity," said Kent Jarrell, a spokesman for the Hershey Trust board
A spokeswoman for Kane was not immediately available to comment. (Editing by Carmel Crimmins and Alistair Bell)
-
Hershey looks too sweet for Mondelez to resist
Jul 1, 2016 | Financial Times
By Lindsay Whipp in Chicago, Scheherazade Daneshkhu and Arash Massoudi in London
Activist investor Nelson Peltz was positively scathing when he first took aim at one of the US’s most prominent confectionery companies. “The name Mondelez, I hate. It sounds like a disease,” he said in 2013.
Three years later, Mr Peltz now sits on the board of the company that makes Oreo cookies and Cadbury’s chocolate. His presence was the price that Irene Rosenfeld, Mondelez chief executive, paid last year to stop him agitating for a combination with PepsiCo’s Frito-Lay snacks division.
Now the Mondelez name, created for the business that spun off from Kraft foods four years ago, could disappear if Ms Rosenfeld’s long-shot $23bn approach for smaller rival Hershey Foods is successful.
The informal $107 a share offer — which included a proposal to keep the century-old Hershey name for the combined company — was rejected on Thursday by the Pennsylvania-based company, which is controlled by the Hershey Trust.
The trust, set up to educate poor children, has resisted prior takeover attempts, but there are good reasons for Ms Rosenfeld to return with a more candy-coated proposal.
Mondelez’s approach is both opportunistic and defensive and comes at a time of increasing consolidation in the food industry, as companies grapple with changing consumer tastes and stubbornly slow sales growth.
Analysts say the proposed deal is strategically sound, because the two companies’ largest markets do not overlap very much and because the chocolate business is still fragmented compared to the rest of packaged food.
A combination of Mondelez and Hershey would overtake Mars as the largest confectioner with 21 per cent of the global market, according to Euromonitor data. Combined sales would reach $37bn.
Mondelez, which also owns Trident chewing gum, is the world’s second-largest confectionery company after Mars of the US, with revenues last year of $26.8bn. But its US chocolate sales are small while Hershey has 40 per cent of the world’s largest chocolate market. That is partly because Hershey rather than Mondelez owns the right to sell Cadbury in the US.
At the same time, Hershey is very US focused — 85 per cent of its sales are in the country, compared to 25 per cent for Mondelez.
Acquiring Hershey now would give Mondelez greater exposure to the US just at a time when the latter company’s key emerging economies — Brazil and China — are, respectively, in recession and experiencing slower growth.
Combining with Hershey would bring Mondelez new products, including Reese Peanut Butter Cup and Hershey Kisses.
The two groups could also combine their distribution systems in the US and cut costs by consolidating sales staff. One downside would be Hershey having to give up its rights to Nestlé’s KitKat brand in the US.
Hershey is also attractive for its high profits margins of 20 per cent against 13 per cent at Mondelez.
The bid also smacks of opportunism because it comes at a time of relative underperformance at Hershey and upheaval at the Hershey Trust, which controls 80 per cent of the voting rights and uses the income from its $12bn portfolio to support a school in the company’s home town.
“There is currently a real drama unfolding at the board of the Hershey Trust,” said analysts at Olivetree. “This could present an opportunity to a third party.”
The Pennsylvania attorney-general — currently Kathleen Kane — has regulatory oversight and could stop a deal if she deems it detrimental to the trust’s philanthropic principles and the broader community.
Her office is investigating the trust over allegations of overpayment of directors, conflicts of interest and expenses, and is seeking the resignation of three longstanding board members. The trust said it was co-operating and “expects to appropriately resolve [the] outstanding concerns”.
Mondelez’s move also has a defensive element. Many investors and analysts see the company as vulnerable to a potential bid from 3G Capital, the New York-based private equity group which has been buying up North American food companies, including Heinz, Burger King and Mondelez’s erstwhile sister group Kraft.
Adding Hershey on to Mondelez would make the combined company that much bigger and harder for 3G to swallow. “The company might fear a hostile bid,” said Pablo Zuanic, analyst at Susquehanna financial group.
Mondelez/Hershey: bitter and sweet
Anachronistic chocolate group may be ready to modernise
Morningstar analyst Erin Lash said that Mondelez’s offer, which gives Hershey an enterprise value of about $26bn or 15 times earnings before interest, tax, depreciation and amortisation (ebitda), is too low.
She said that an enterprise value of 16-17 times ebitda would be “reasonable”, implying a price of $120 a share.
Analysts say that Mondelez is likely to improve its $107 a share offer in the coming weeks. But its approach may also flush out other potential suitors, such as Ferrero though the Italian confectioner would be unlikely to be able to fund a bid on its own.
Switzerland’s Nestlé, the fourth-largest chocolate company in the US, could also enter the fray but it has been focusing on expansion at the premium end of the chocolate market and Hershey is mass market, analysts say.
Despite deep-seated doubts that the trust would be interested in a deal, analysts and industry veterans agree that Mondelez’s advances are not over and that winning Hershey would be a coup for Ms Rosenfeld.
Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
-
Hershey board rejects takeover bid from rival Mondelez
Jul 1, 2016 | The Village Sun Times
By Max Garcia
Mondelez's takeover bid for Hershey, which had a $21 billion market value on Thursday, could've been a blockbuster move bringing together the world's second- (Mondelez) and fifth-largest (Hershey) confectionery makers together, the WSJ reports. These two companies have the top five sweets in the whole world and Mondelez is desperate to expand its global footprint.
But a deal would require the nod of the tight-knit Hershey Charitable Trust, which holds 8.4 per cent of Hershey's common stock and 81 per cent of its voting power.
Because the majority owner of Hershey is the Hershey Trust Company, which controls 80% of the board and has a mandate to operate in the best interests of Hershey, Pennsylvania, Hershey is directly tied its location.
Mondelez recently sent a letter to Hershey proposing the combination, according to reports in the Wall Street Journal. Mondelez representatives did not immediately respond. One of the best-selling markets for Lancaster Caramel Crèmes is Lancaster, Pa., where Milton Hershey launched his first successful candy company and began experimenting with coating caramels in chocolate, according to sales data provided to the Washington Post previous year.
Mondelez had offered to buy Hershey for $107 a share in a cash and stock deal. (HSY) in what would form the largest chocolate company in the world.
Founded in 1894 by Milton Hershey, the Pennsylvania-based company is North America's leading manufacturer of chocolate, non-chocolate confectionary and chocolate-related grocery products. But he said the offer by Mondelez could spur more aggressive cost-cutting at Hershey.
Then-Attorney General Mike Fisher and the Dauphin County Orphans Court halted the sale of the Hershey Co.to Wrigley in 2002 when the community and unionized protested the deal in the streets.
Jack Skelly, food analyst at Euromonitor International, said: "The news that Hershey is the subject of a bid from Mondelez has certainly captured the imagination of those in the food industry".
"The Trust...is outwardly very committed to keeping the company independent", Bernstein analyst Alexia Howard said in June previous year.
Activist investor William Ackman had been pressing Mondelez to increase revenue or sell out.
-
Is A Hershey – Mondelez Merger Sweet Enough?
Jul 1, 2016 | Value Walk
By Michelle Jones
Hershey shares pulled back on Friday after the company said it had rejected a buyout bid from Mondelez International. The bid was worth $23 billion or $107 per share. Analysts were quick to issue reports on the proposal, with topics ranging from what Mondelez’s motives might be in making an offer to whether a deal might actually come out of the rejected bid.
Why did Mondelez approach Hershey?
One of the more interesting musings is whether Mondelez is seeking to draw out a potential suitor. JPMorgan analysts believe it’s possible and that Kraft Heinz may be interested, although neither Mondelez nor Kraft Heinz has said anything about being interested in a combination. They said previously that they didn’t think Kraft Heinz was ready to make another acquisition, but now they believe the most recent merger may be going more quickly than either company thought it would. They add that Mondelez may be trying to force Kraft Heinz’s hand “sooner than later.”
The JPMorgan team explains that if Mondelez is seeking a bid from Kraft Heinz, its management might be concerned that fundamentals might disappoint going forward. They believe emerging markets aren’t doing as well as Mondelez had expected and emphasize that they are simply weighing in on what the company might be intending to do.
Modelez may be trying to protect itself
Barclays analysts take the opposite view of Mondelez’s approach of Hershey. Rather than trying to force a bid from Kraft Heinz, they suggest that acquiring Hershey might be a defensive move rather than an offensive one. By acquiring the chocolate maker, the company could make itself too big for another food company to gobble up. It has been widely speculated that Kraft Heinz was interested in acquiring Mondelez.
Another possibility they suggest is that Mondelez sees this being as an opportunistic time to pursue Hershey because its challenges in terms of “domestic competition and macro-related disruptions in its international portfolio” are widely known. From a strategic standpoint, they note that Hershey would give Mondelez a “premier and high-margin confectionary business in the U.S. that would likely prove highly complementary to its existing Nabisco unit, enable the unification of Cadbury globally, and enhance the company’s already robust domestic distribution network.” Conversely, Mondelez could also leverage its international scale to boost Hershey’s international operations.
Barclays’ other suggestions are similar to those posited by JPMorgan. One is that Mondelez is trying to use its balance sheet to offset its own challenges. The other is that it is testing the waters and potentially trying to become a buyout target itself.
A Mondelez – Hershey combination is unlikely
Citi analysts see a merger of Mondelez and Hershey as being unlikely. One reason is because the Hershey Trust holds 80% voting control of the chocolate maker, and Morgan Stanley analysts note that the trust has opposed a sale of the company in the past. However, even if the trust approves of a combination, they’re unsure the deal would get past the Pennsylvania Attorney General. Morgan Stanley also corroborates this, pointing out that after Hershey’s failed sale to Wrigley in 2002, officials passed legislation giving them greater authority to stop a transaction “if proven to violate trustees’ fiduciary duties.”
However, should a deal between Mondelez and Hershey become a reality, Morgan Stanley analysts believe that Nestle might look into getting back the rights to its KitKat license in the U.S., which The Wall Street Journal estimates to be worth $3 billion.
Shares of Hershey slipped by as much as 1.4% to $111.90, while Mondelez shares slipped by as much as 0.48% to $45.29 during regular trading hours on Friday.
-
More Squawk from Jim Cramer: Mondelez Offer for Hershey (HSY) ‘Way Too Low’
Jul 1, 2016 | TheStreet
By Kaya Yurieff
Shares of Hershey (HSY) are down 1.74% to $111.51 on Friday afternoon after the chocolate giant rejected a $23 billion takeover offer from snack food company Mondelez (MDLZ) yesterday.
The offer is "way too low," TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" this morning, adding that "if Hershey wants to sell it's gotta be much higher."
"I love Hershey. I remember when they first decided to be more than just chocolate and they started buying some other brands and then they moved their factories to less expensive places so that the gross margins went up," Cramer noted.
"It's been a winner and it's worth more than it's selling for substantially," Cramer said of Hershey.
Cramer also said that he likes Mondelez much more than he did a year ago and that the company is "getting better."
But the idea of a bid like the one that came out for Hershey was "fanciful," according to Cramer. To him, the offer said that Mondelez wanted to do some kind of transaction.
Cramer said in the above video that Hershey is a "brilliant" acquisition, but an offer would have to be between $130 and $140 per share.
Additionally, Cramer mentioned that Kraft Heinz Foods (HNZ) needs a deal because the company has "no growth."
He also noted that older brands such as General Mills (GM) need to continue to "move like sharks" to stay alive as Millennials do not have the same food habits as older generations.
Shares of Mondelez are declining 0.77% to $45.16 on Friday afternoon.
Separately, TheStreet Ratings Team has a "Buy" rating with a score of B on Hershey stock.
The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, notable return on equity and solid stock price performance.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
-
Hershey: Can Mondelez Make Its Deal Dream a Reality?
Jul 1, 2016 | Barrons
By Ben Levisohn
Credit Suisse analyst Robert Moskow and team consider what Mondelez International(MDLZ) would need to do in order to make a purchase of Hershey (HSY) a reality:
Widespread news reports thatMondelez made a $107/share bid for Hershey strikes us as a savvy and logical strategic move by the company to expand its global scale in the confectionery category and capture value through massive synergies. A transaction would create a combined entity with 19% market share of the global confectionery market and 21% of global chocolate. It also would give Mondelez full control of the Cadbury license in the U.S., which Hershey acquired from Rowntree in the 1980’s. By making the bid public, Mondelez forces the Hershey Trust (which controls about 81% of the vote) to either accept the bid and violate its charter to maintain control of the business, or reject the bid and perhaps push Hershey management to present a more aggressive value creation plan of its own. At this point, it is close to impossible for us to opine on which way the Trust is leaning. The Trust also needs to factor in the political ramifications of selling the business, given the fact that the Commonwealth of Pennsylvania blocked a proposed sale once before in 2002.
How high could Mondelez raise its bid? The $107/share $12.5 billion cash and stock bid…strikes us as too low, given that it represents only a 10% premium to yesterday’s stock price and only 14x forward EBITDA… If Mondelez were willing to take $0.05 of dilution in year one (assuming 1/3 of synergies hit the bottom line) and lever up to 5.0x EBITDA, we figure it could raise its bid to $122/share.
Mondelez might have to add more deal sweeteners. The offer includes renaming the entire company Hershey, locating the global chocolate headquarters in Pennsylvania, and a pledge to retain jobs. Presumably this would give more ammunition to the Trust to satisfy local politicians who are worried about economic ramifications of a transaction.
Shares of Mondelez International have declined 0.6% to $45.26, while Hershey has dropped 1.2% to $112.04.
-
RBC Capital Provides Insight on Mondelez Rejected Takeover Bid for Hershey Co
Jul 1, 2016 | Bidness ETC
Late yesterday, Hershey Co. (NYSE:HSY) rejected Mondelez International’s bid to acquire it in in a cash-plus-stock deal. The acquirer also offered to make Hershey, Pennsylvania its new global headquarters, along with a promise to protect all the jobs, in an attempt to win the confidence of Hershey Trust Company, which has over 81% of the voting power. RBC capital believes that the proposal could have provided greater cost-cutting incentives at the target company.
The Hershey Trust does not intend to compromise the control of its businesses, as surrendering the ownership for a few near-term promises would make the newly-formed company vulnerable to a potential takeover by Kraft Heinz Foods Co. In this regard, Mondelez International Inc. (NASDAQ:MDLZ) will not gain any significant advantage if it hands over the real voting control to the trust.
The chocolate-maker posed as a highly-synergistic asset for the snack giant, as the former has the top confectionary business in quite a profitable market. It also owns the Cadbury brand license rights in the US, while Mondelez possesses them abraod.
A newly-formed business would have complemented the Oreo maker’s performance, as it has a low confectionary exposure. Hershey could have gained significant synergies in purchasing, production, distribution, and overheads, had the deal gone forward.
The proposed acquisition price of $107 apiece suggested an enterprise value-to-earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 14.5x on fiscal year 2016 (FY16) EBITDA estimate. The firm believes that Hershey’s and the Trust’s Boards will continue talks in the upcoming months, with more precise questions. HSY stock has underperformed the peers, and has the biggest cost structure in the country’s food market, given the company’s advertising and general expenses.
It is noteworthy that RBC Capital could justify Hershey’s investments at a time when the company’s sales growth was considerably ahead of its competitors—during calendar year 2008 (CY08) to CY14—but cannot do so now, as it has turned challenging in the past 12-18 months. The firm opined that it would not come as a shock should the company opt to become aggressive in its cost structure. It kept its Sector Perform rating on HSY shares, and tagged MDLZ stock as Outperform.
-
Did the Hershey School reject students for depression? Two suits say yes
Jul 1, 2016 | Philadelphia Inquirer
By Bob Fernandez
Lawyers for two former students, including a 14-year-old girl who committed suicide, sued the $12.3 billion Milton Hershey School on Thursday in federal court here, alleging that they were expelled for depression and having suicidal thoughts.
The suits say the school for impoverished children violated a 2012 agreement with the Justice Department to treat disabled students better and seeks unspecified monetary damages and reforms.
Abbie Bartels, 14, hanged herself in her home in central Pennsylvania in June 2013 after she was told she could not return to the 2,000-student boarding school for her eighth-grade graduation. She had enrolled there as a 5-year-old but exhibited depression only toward the end of eighth grade, the suit said.
"Abbie was terminated by [the Hershey School] and released back to a poor, unstable, and at-risk environment, contrary to any reasonable treatment," said the suit filed by her parents, Julie Ellen Wartluft and Frederick Bartels.
Spokeswoman Lisa Scullin said the Hershey School, partly funded by Hershey Co. chocolate profits, "is firmly committed to the safety and fair treatment of our students" who qualify under the Americans with Disabilities Act.
The law provides that private schools and other public places cannot simply bar those with physical or mental-health disabilities but must make accommodations for them.
Scullin said that "some children have very severe emotional or mental-health issues that go beyond our school's ability to help them. These students need to be cared for in a professional health-care environment, not in a boarding school setting."
The second suit, filed by Adam Dobson, said that Dobson had worked in the school's admissions department but was eventually expelled in the summer of 2013 after he underwent treatment for depression and told school officials he was considering suicide, his suit said.
His houseparents, the suit said, forced him to watch "a religious-based video that was intended to 'cure' him of being gay." Hershey School students live in more than 150 homes, staffed by houseparents who are school employees, on the vast, 10,000-acre Hershey property. Dobson is now 21 and living in New York.
Lawyers from the Dilworth Paxson LLP firm in Center City are representing the plaintiffs in both cases.
Scullin said the notion that houseparents forced Dobson to watch the video was "an outrageous allegation and a practice the administration would never allow or condone."
The federal suits add to the mounting crisis at the super-rich Pennsylvania institution.
Investigators for the Justice Department have been looking into whether the school fails to enroll physically disabled children and expels students with mental-health problems, as Thursday's suits in Philadelphia claim.
The federal agency concluded in 2012 that the Hershey School violated federal disabilities laws by rejecting a 13-year-old Delaware County boy for admission because he had contracted HIV, the virus that causes AIDS.
The Hershey School settled the case by paying the boy $750,000 and agreeing to comply with the Americans with Disabilities Act.
The Justice Department declined to comment Thursday.
Separately, the Pennsylvania Attorney General's Office is investigating the Hershey Trust - the entity created by Milton and Catherine Hershey more than 100 years ago to finance the Hershey School - over its compliance with a 2013 settlement agreement meant to curb soaring director compensation on the trust's complex of boards, and other financial irregularities.
The same nine trust directors have oversight of both the trust's finances and the Hershey School.
Trust directors collectively earned $2 million in compensation by holding seats on for-profit companies owned or controlled by the trust, according to the Hershey School's latest IRS tax return, for the tax year ending July 31, 2015.
-
Is Milton Hershey School to Blame for Abbie Bartels’ Suicide?
Jul 1, 2016 | Philadelphia Magazine
By Victor Fiorillo
It has been three years since 14-year-old Pennsylvania girl Abbie Bartels died by suicide, and now her parents have filed a lawsuit against the prestigious Milton Hershey School in Hershey, Pennsylvania, accusing the boarding school of causing her death by expelling Bartels and barring her from eighth grade graduation after she expressed a desire to harm herself.
Bartels’ parents had financial and personal problems, and so she began living at the Milton Hershey School when she was 5 years old. The school is free to attend, and admission is based on, among other things, monetary need and life circumstance. With an endowment of more than $10 billion, the school is one of the largest and wealthiest of its kind.
According to the lawsuit, filed in Philadelphia’s federal court, Bartels was a model student. She received top grades and had aspirations of becoming an FBI agent. She regularly achieved the honor roll and was on the swim team and anti-bullying committee. But toward the end of the eighth grade, after being bullied herself, Bartels became severely depressed, and things started to unravel.
At the beginning of May 2013, Bartels was admitted to an on-campus hospital after she told her houseparents that she wanted to hurt herself. (Students at the Milton Hershey School live in small groups under the authority and guidance of husband-and-wife “houseparent” teams, who are to teach and uphold the religious values on which the school was founded.) She eventually told doctors that she had recently cut herself intentionally with a rock and that she had once duct-taped a pillow to her face.
Throughout May 2013, Bartels’ depression grew worse, and she was transferred to an off-campus mental health facility. After less than two weeks of treatment, Bartels was discharged, and doctors there recommended that she continue to live at and receive treatment at the Milton Hershey School.
After a brief return to the school, Bartels again expressed a desire to harm herself, and she was again transferred to an off-campus facility. Once she was discharged, the school expelled Bartels, claims the suit, which alleges that the school maintained a “shadow policy” that said that a student would be automatically expelled after two hospitalizations in external mental health facilities. The possibility of a one-year leave-of-absence was discussed, and Bartels was sent to live with her family, in an environment that the suit describes as “chaotic” and unhealthy.
On June 19th, claims the suit, a school official informed Bartels that she would probably never return to the school. One day later, she was told that she could not attend her 8th grade graduation, in spite of her on-campus doctor’s recommendation that she be allowed to participate. He called her an “excellent student” and “well-behaved.”
Nine days after she learned that she was barred from graduation, Bartels hanged herself with the belt of her bathrobe at her father’s home near Harrisburg. “Milton Hershey School’s actions were a virtual death sentence to a vulnerable and sensitive child,” argues the suit. “Abbie’s suicide was completely preventable.”
The suit claims that it’s not the first time that a student at the Milton Hershey School was expelled due to depression or suicidal ideations and mentions a few specific incidents. According to the lawsuit, when one board member openly questioned the decision to expel a suicidal student in 2010, “a senior Milton Hershey School official stated words to the effect that Milton Hershey School did not want the publicity of someone killing themselves at the Milton Hershey School.”
Bartels’ death did not go unnoticed. The circumstances surrounding her departure from the Milton Hershey School and her subsequent suicide received media attention, including an investigation on Anderson Cooper 360. During that segment, Bartels’ mother said she told the school, “What are you, a bunch of morons?” when they said that she would be excluded from graduation.
The suit accuses the school of wrongful death, intentional creation of danger, negligence, and conspiracy to endanger children, among other offenses and seeks unspecified damages. The suit also seeks injunctions and orders that would require the school to set up a therapeutic home for seriously depressed students and that would prohibit the school from expelling students on the basis of mental illness.
On the same day that this suit was filed, a New York man filed his own lawsuit against the Milton Hershey School, claiming he received similar treatment after becoming depressed while a student there.
In 2012, the school settled a lawsuit filed by the parents of a 14-year-old boy who was denied admission into the Milton Hershey School because he was HIV positive. As a result of that settlement, the Milton Hershey School entered into agreements with the United States Department of Justice and the Pennsylvania Attorney General’s Office, promising to make certain changes and reforms.
Earlier this year, the AG’s office stated that the school is in violation of its agreement with that office, in part because the school failed to “secure new board members with experience in early childhood education as well as at-risk dependent children.” The Milton Hershey School is said to be the target of a federal probe that it violated the civil rights of disabled students.
The school did not immediately respond to a request for comment.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Traditional Media
National Broadcast News
Full Text of Stories Below
Add recipients
Suggested