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Hershey Media Report 7/23/16
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Hershey Trust Reaches Tentative Deal With Pennsylvania on Governance
Jul 22, 2016 | New York Times
By Michael J. de la Merced
The charitable trust that controls Hershey has reached a tentative deal with the Pennsylvania attorney general that would shake up its governance, in exchange for warding off a potential legal battle. -
Hershey Trust to Reach Settlement With Pennsylvania Attorney General’s Office
Jul 22, 2016 | Wall Street Journal
By Annie Gasparro
Hershey Co.’s largest shareholder—a trust that oversees billions of dollars for a local, nonprofit school—has agreed to make significant governance changes that could affect the future of the chocolate company, according to people familiar with the matter. -
Hershey Trust reaches in-principle reform agreement
Jul 22, 2016 | Reuters
By Lauren Hirsch and Greg Roumeliotis
The board of the charitable trust that controls Hershey Co (HSY.N) said on Friday it had reached an in-principle agreement with the Pennsylvania Attorney General's office that would avoid a legal row in exchange for reforms in how it is run. -
Why Hershey's chocolate company is facing an historic test
Jul 22, 2016 | Philadelphia Inquirer
By Bob Fernandez
With mass-market U.S. chocolate consumption on the wane and millennial tastes trending toward health-conscious snacks, the Hershey Co. chocolate giant faces a challenging future, analysts say. -
Hershey Trust director changes part of settlement deal with Pa Attorney General’s Office
Jul 22, 2016 | Fox 43
By Howard Sheppard
The Wall Street Journal reports the Hershey Trust Board has reached a settlement with the Pennsylvania Attorney General’s Office that will result in significant changes affecting the board itself. Those changes could also affect the future of Hershey’s, the world’s largest chocolate maker. The Hershey Trust is the Hershey Company’s biggest shareholder and controls the multi-billion dollar Milton Hershey School. -
Hershey Trust, AG office agree to changes 1 week before deadline
Jul 22, 2016 | Pennsylvania Live
With a week left before its July 31 deadline, it appears the now nine-member board of the Hershey Trust has resolved a series of issues related to a 2013 agreement between the trust and the state attorney general's office, which had then completed a two-year investigation into the inner workings of the trust. -
Attorney general, Hershey Trust reach tentative deal
Jul 22, 2016 | Philadelphia Inquirer
By Bob Fernandez
The troubled Hershey Trust for impoverished children and the Pennsylvania Attorney General's Office have reached a deal to settle the latest investigation into the giant charity that will include board member resignations, according to a source with direct knowledge of the agreement. -
Hershey Trust Has Reached Reform Agreement
Jul 23, 2016 | Chaffey Breeze
By David Stone
The board of directors of the Hershey Trust, a charitable trust, which controls Hershey Co., announced Friday that it reached an agreement in principle with the Attorney General’s office of Pennsylvania that would avoid a legal battle in exchange for the way in which it is operated. -
DJ: Hershey Trust settling with state attorney general over governance
Jul 22, 2016 | Seeking Alpha
By Jason Aycock
The Hershey Trust (NYSE:HSY), facing a court date over governance charges, will settle with Pennsylvania's attorney general to resolve its investigation, according to Dow Jones reports. -
Hershey Trust to Reach Settlement With PA AG
Jul 22, 2016 | CNBC
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Hershey Trust Reaches Tentative Deal With Pennsylvania on Governance
Jul 22, 2016 | New York Times
By Michael J. de la Merced
The charitable trust that controls Hershey has reached a tentative deal with the Pennsylvania attorney general that would shake up its governance, in exchange for warding off a potential legal battle.
If a final agreement is reached, it would settle a months long dispute between Kathleen G. Kane, the Pennsylvania attorney general, and the Hershey Trust Company.
Ms. Kane had set a July 31 deadline for the trust company to formally resolve issues arising from an earlier investigation into the organization.
It is unclear what effect the settlement might have on the chocolate maker’s defense against an unwanted $23 billion takeover bid by a fellow snack maker, Mondelez International.
Set up by Hershey’s founder, Milton S. Hershey, the trust is connected to a nonprofit school for needy children that was founded in 1909. The Milton Hershey School Trust owns 8.4 percent of the confectioner’s common shares and 81 percent of the special voting shares. But the shares are voted by the board of the Hershey Trust Company.
Under the terms of the prospective final agreement, the trust would limit its trustees to 10-year terms, according to a person briefed on the matter who was not authorized to speak publicly. Three trustees — Robert F. Cavanaugh, James E. Nevels and Joseph M. Senser — would step down by the end of the year.
The chairwoman of the trust, Velma A. Redmond, would step down by the end of 2017, along with another trustee, James M. Mead.
A spokesman for the board of the Hershey Trust Company said in a statement on Friday that it had reached “an agreement in principle” with the attorney general and was “working on the final details in productive discussions” with the office.
Pennsylvania’s first deputy attorney general, Bruce L. Castor Jr., said in a separate statement: “Yesterday, I met with board members and a lawyer for the trust, along with our people, and I agreed on behalf of the attorney general in principle to a series of changes that the trust would implement.”
The prospective deal’s terms were reported earlier by Reuters.
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Hershey Trust to Reach Settlement With Pennsylvania Attorney General’s Office
Jul 22, 2016 | Wall Street Journal
By Annie Gasparro
Hershey Co.’s largest shareholder—a trust that oversees billions of dollars for a local, nonprofit school—has agreed to make significant governance changes that could affect the future of the chocolate company, according to people familiar with the matter.
Hershey Trust Co. has agreed on terms of a settlement with Pennsylvania’s top law-enforcement officer, which has been investigating the trust board over allegations of excessive compensation and conflicts of interest.
The parties are in the process of drafting a legal document outlining the terms, which would lead to resignations of some trust board members, these people said. The settlement would include enforcing a cap on compensation and term limits of board members, according to these people.
With its roughly 30% stake in Hershey and 81% of its voting power, the Hershey Trust plays a key role in the future of the chocolate company.
A few weeks ago, Mondelez International Inc., maker of Oreo cookies and Ritz crackers, made a $23 billion bid for Hershey. The offer was rejected unanimously by Hershey’s corporate board, which includes three members of the trust’s board.
“We have reached an agreement in principle and are working on the final details in productive discussions with the Office of the Attorney General,” a spokesman for the trust said Friday.
First Deputy Attorney General Bruce Castor said in an email Friday that he met with board members and a lawyer for the trust on Thursday and agreed “in principal to a series of changes.” He declined to give further details on the proposed deal.
Industry experts say the upheaval, and a nearly entirely new 10-person board, could give Mondelez or other potential bidders an opening to try to buy the company.
Any future offers for Hershey that are accepted by the corporate board would require the approval of the trust as well as the Pennsylvania Attorney General’s Office, which has oversight powers over the trust and can take it to court to stop a sale if it thinks it will hurt the local economy.
The Hershey Trust has opposed efforts to sell the company in the past, as it has been under pressure by the local community to keep Hershey independent. In 2002, the trust ultimately rejected an offerby Wm. Wrigley Jr. Co.
The trust’s board has a legal obligation to act in the best interest of the Milton Hershey School for underprivileged children. Proceeds from the trust’s investments provide the revenue to run the school, which has about 2,000 students, many of whom get jobs and internships within the Hershey empire, including the chocolate factory in town, the Hershey resort and the local theme park.
But the trust’s roughly $12 billion endowment is largely tied up in Hershey stock, making its portfolio heavily concentrated. Some say selling the company would benefit the school by diversifying the trust’s assets and generating higher returns.
At issue in the current investigation by the attorney general’s office were concerns about alleged overpayments for board members, reimbursements for exorbitant travel expenses and term limits that exceed 10 years, according to internal memos from the attorney general’s office reviewed by The Wall Street Journal.
Under the settlement, several board members would resign at the end of the year, according to people familiar with the matter. This would be in addition to the four who have resigned in the past several months.
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Hershey Trust reaches in-principle reform agreement
Jul 22, 2016 | Reuters
By Lauren Hirsch and Greg Roumeliotis
n" style="transform: translate3d(0px, 0px, 0px);">The board of the charitable trust that controls Hershey Co (HSY.N) said on Friday it had reached an in-principle agreement with the Pennsylvania Attorney General's office that would avoid a legal row in exchange for reforms in how it is run.
The settlement could provide stability to the trust following months of infighting and confrontation with the attorney general's office. It could also offer the clarity needed for Mondelez International Inc (MDLZ.O) to make a new approach to acquire Hershey.
The $12 billion trust, set up by company founder Milton Hershey over a century ago to fund and run a school for underprivileged children, must approve any sale of the company. It rejected a $23 billion cash-and-stock offer for Hershey by Mondelez, the maker of Oreo and Cadbury chocolate, last month.
The Pennsylvania Attorney General's office, the trust's sole overseer, had threatened legal action to remove trustees unless a settlement over its governance was reached by the end of July.
"We have reached an agreement in principle and are working on the final details in productive discussions with the Office of the Attorney General," Kent Jarrell, a spokesman for the trust’s board, said.
"Yesterday, I met with board members and a lawyer for the Trust, along with our people, and I agreed on behalf of the Attorney General in principle to a series of changes that the Trust would implement," said First Deputy Attorney General Bruce L. Castor Jr. "When that is reduced to writing, and if it is signed by us and them, Pennsylvania Attorney General Kathleen Kane will make the terms public."
The agreement will impose 10-year term limits on trustees, according to people familiar with the matter who asked not to be identified because the settlement's details have not been announced. Three trustees - Joseph Senser, Robert Cavanaugh and James Nevels - will have to step down by the end of the year, the people said. Senser and Cavanaugh had been trustees since 2001, while Nevels has been a trustee since 2007.
Hershey Trust board Chairwoman Velma Redmond, who joined the trust in 2003, will stay on to ensure continuity, but will step down by the end of 2017, along with James Mead, a trustee since 2007, the sources added. Mead, Nevels and Cavanaugh are the trust's three representatives on Hershey's board of directors.
Caps on trustees' compensation are also part of the settlement, though these exclude salaries of trustees at Hershey and other affiliates, the people said. The Pennsylvania Attorney General's office will also be given a 30-day window to object to new trustees, the people added.
The agreement is unlikely to please many Milton Hershey School alumni that had been calling for deeper reforms, said Ric Fouad, a prominent alumnus and a board member for Protect the Hersheys' Children, an organization that calls for significant changes at the trust.
"They have squandered the ability to get reforms. A broken oversight office can't fix a broken charity," said Fouad, referring to the fact that Attorney General Kathleen Kane has had her legal license revoked and will not be seeking re-election in November.
TURMOIL
The trust has been rocked by internal dissent and turnover since it last reached a reform agreement with the attorney general's office in 2013. Trustee Joan Steel resigned earlier this month, following the departures of Richard Zilmer, John Fry and Stephanie Bell-Rose over the past year.
The trust normally has 10 board members.
Cavanaugh was the subject of an internal conflict of interest investigation stemming from his role in helping secure a summer internship for his son at one of the trust's investment management firms. Cavanaugh, appointed to the board in 2001, was the trust's chairman at the time.
This year, the trust fired its executive vice president, after he pleaded guilty to wire fraud associated with campaign contributions. It also fired its chief compliance officer, after placing him on leave, when a letter he wrote detailing the trust’s bitter feuds leaked to the public.
Stability at the trust could make it more open to reviewing its ownership of Hershey. The trust owns close to a third of Hershey, but the company accounts for more than two-thirds of its investment holdings.
In 2002, the trust cited the need for diversification as a reason of putting Hershey up for sale. Hershey then attracted a $12.5 billion offer by chewing gum maker Wm. Wrigley Jr. Co. However, the deal was abandoned after Pennsylvania's Attorney General successfully petitioned a court to block the offer amid opposition from the local community.
"This portfolio that is meant to rescue needy children is being exposed to needless risk that could be diversified away without compromising expected return." said Robert Sitkoff, a Harvard Law School professor specializing in wills, trusts, estates, and fiduciary administration.
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Why Hershey's chocolate company is facing an historic test
Jul 22, 2016 | Philadelphia Inquirer
By Bob Fernandez
With mass-market U.S. chocolate consumption on the wane and millennial tastes trending toward health-conscious snacks, the Hershey Co. chocolate giant faces a challenging future, analysts say.
While the central Pennsylvania company has been developing new product lines, its "category has been declining with the changing tastes of millennials," said Jack Russo, senior consumer staples analyst with Edward Jones. "Snacking is taking a different form, more protein" - energy bars, jerky, and fruits and nuts.
Adding pressure: U.S. consumption of chocolate - Hershey's core product - has fallen by about 3 percent a year since 2006, when consumption peaked, a recent UBS investment report noted. And a group of powerful global competitors is targeting its home turf.
Now, the Hershey Co. faces a historic transition. It has received a buyout offer from Mondelez International Inc. which was rejected but is widely expected to be raised.
The Pennsylvania attorney general also has opened a new probe of the Hershey Trust, which controls the giant chocolate company. The trust also manages $12.3 billion in charitable assets to finance the 2,000-student Hershey School for impoverished children.
Hershey Co. represents the trust's biggest asset, and its stock dividends represent a major cash source for running the Hershey School, where costs per student are about $100,000 a year.
The school's primary mission is to serve Pennsylvania's needy children, including those from Philadelphia.
The attorney general investigation has focused on whether the trust board - now comprising nine people - violated a 2013 agreement with the state agency to curb board compensation and travel.
Mark Pacella, the attorney general's top nonprofit regulator, has demanded that three trust members resign. He would like the trust to limit board service to 10 years, which could lead to two more departures by the end of 2017 - or a majority of the current board.
Pacella has given the trust a deadline of July 31 to comply with his demands.
"We continue to have conversations with representatives for the trust," attorney general spokesman Jeffrey Johnson said Wednesday. "We are working to make sure the mission of Milton Hershey is fulfilled. Our goal is to achieve a long-term solution that will ensure that occurs."
Trust spokesman Kent Jarrell said: "We are still hopeful of a resolution."
He said the trust could not speculate on the prospects of the chocolate company. "We continue to review the diversification profile of the School Trust assets with the assistance of expert outside advisors," he said.
Amid the turmoil, the Hershey Co. has made modest efforts to reinvent itself. It recently introduced Cadbury-branded pouches of wrapped chocolate snacks. It has also diversified into such products as BarkThins, a chocolate snack, and Krave beef jerky.
Hershey, analysts noted, has raised prices on existing products, maintaining profits. It has cut costs by closing plants over the last decade, and opened a large new plant in Mexico.
But with the uncertainty at the trust and shifting consumer tastes, Mondelez - which itself could be a takeover target - is now making a determined run at Hershey.
On June 30, the Hershey Co. board unanimously rejected Mondelez's $107-a-share offer - worth about $23 billion. Many on Wall Street expect the Illinois company to come back with a higher offer.
"This is why Mondelez did what they did. Because [Hershey chocolate company] is weaker and there has been this controversy," Russo said.
But the $107-a-share offer wasn't high enough to merit serious consideration because of Hershey's commanding U.S. market position in chocolate.
"If they really want it, they better put a number out there and stop goofing around," Russo said. A per-share price that would catch Wall Street's attention would be $125 a share, he said.
Even then, Russo said, he did not know whether the trust that controls the company would say yes to a deal. "No one knows what motivates the trust board," Russo said. "You got to give Mondelez credit for giving this a shot."
Russo added that a deal would be complex because of the trust board decision-making process and the involvement of the attorney general. "If a deal gets done, I don't think it will be agreed upon this year."
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Hershey Trust director changes part of settlement deal with Pa Attorney General’s Office
Jul 22, 2016 | Fox 43
By Howard Sheppard
HARRISBURG, Pa. – The Wall Street Journal reports the Hershey Trust Board has reached a settlement with the Pennsylvania Attorney General’s Office that will result in significant changes affecting the board itself. Those changes could also affect the future of Hershey’s, the world’s largest chocolate maker. The Hershey Trust is the Hershey Company’s biggest shareholder and controls the multi-billion dollar Milton Hershey School.
The Attorney General’s Office has been investigating the trust board over allegations of excessive compensation and conflicts of interest. The deal could lead to resignations of some trust board members.
A legal document is reportedly being drafted.
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Hershey Trust, AG office agree to changes 1 week before deadline
Jul 22, 2016 | Pennsylvania Live
With a week left before its July 31 deadline, it appears the now nine-member board of the Hershey Trust has resolved a series of issues related to a 2013 agreement between the trust and the state attorney general's office, which had then completed a two-year investigation into the inner workings of the trust.
"Yesterday, I met with board members and a lawyer for the Trust, along with our people, and I agreed on behalf of the attorney general in principal to a series of changes that the Trust would implement. When that is reduced to writing, and if it is signed by us and them, Pennsylvania Attorney General Kathleen Kane will make the terms public," First Deputy Attorney General Bruce L. Castor Jr. said in a statement.
Among the chief requirements of any resolution, according to previous PennLive reporting, were that the trust be reimbursed for all fees and expenses related to an internal investigation (believed to have totaled more than $650,000) regarding the internship of a board member's son by one of the trust's investment managers; that all board members who have served 10 or more years resign; and that board compensation be reduced. Beyond those major concerns, the attorney general's office also said there were "matters of concern" related to board members conduct and abrupt resignations.
The deadline comes amid reports of board infighting, the resignation of a board member within the last month, and other shakeups in the trust: one top official was fired ahead of federal charges (not trust related), while another was placed on indefinite leave in June.
The Hershey Trust board oversees the Hershey Trust Co., which manages the $12 billion-plus endowment left by Milton S. Hershey to fund the private Milton Hershey School in Derry Township. It includes a controlling stake in the Hershey Co. and outright ownership of Hershey Entertainment & Resorts company. It operates through a series of interlocking boards — the school board, the trust company board, the board of the chocolate company and the board of the entertainment company. Both the school and the trust company share the same board members, while some members also sit on the boards of the two for profit companies.
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Attorney general, Hershey Trust reach tentative deal
Jul 22, 2016 | Philadelphia Inquirer
By Bob Fernandez
The troubled Hershey Trust for impoverished children and the Pennsylvania Attorney General's Office have reached a deal to settle the latest investigation into the giant charity that will include board member resignations, according to a source with direct knowledge of the agreement.
The trust and the Attorney General's Office confirmed that a deal had been struck late Friday but declined to disclose details. The number of resignations on the nine-member board could not be immediately determined.
The Attorney General's Office requested in February that three members leave the fractious board because they had served more than 10 years. An additional two members will hit the 10-year mark in 2017.
"We have reached an agreement in principle and are working on the final details in productive discussions," trust spokesman Kent Jarrell said late Friday.
First Deputy Attorney General Bruce L. Castor Jr. said that he met on Thursday afternoon with trust officials and a trust's lawyer, and "agreed on behalf of the attorney general in principal to a series of changes that the trust would implement. When that is reduced to writing, and if it is signed by us and them, Pennsylvania Attorney General Kathleen Kane will make the terms public."
The Attorney General's Office opened the investigation into the scandal-plagued $12.3 billion charity earlier this year over its compliance with a 2013 settlement agreement.
Leaks from the trust have revealed a board that hired lawyers and spent millions of dollars investigating itself.
The Attorney General's Office also has raised concerns that the trust board members violated compensation curbs that were part of the 2013 agreement with the attorney general.
In the midst of this turmoil, Mondelez International Inc. has made an offer to buy chocolate giant Hershey Co. for $23 billion. The trust controls the Hershey company through super-voting shares. The Hershey company board rejected the Mondelez offer, and many on Wall Street expect Mondelez to make a higher one.
The multibillion-dollar trust finances and oversees the 2,000-student Milton Hershey School for impoverished children.
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Hershey Trust Has Reached Reform Agreement
Jul 23, 2016 | Chaffey Breeze
By David Stone
The board of directors of the Hershey Trust, a charitable trust, which controls Hershey Co., announced Friday that it reached an agreement in principle with the Attorney General’s office of Pennsylvania that would avoid a legal battle in exchange for the way in which it is operated.
The settlement is set up to provide stability to this trust following a number of months of confrontations with the AG’s office as well as infighting.
It also could offer clarity that Mondelez International needs to make another approach to buy Hershey.
The trust, which is worth $12 billion, was set up by Milton Hershey the founder of the company more than 100 years ago to fund as well as operate a school that was for children who were underprivileged, must approve the sale of the business.
The trust rejected an offer of both cash and stock equaling $23 billion by Mondelez for Hershey in June. Mondelez is the maker of Cadbury chocolates and Oreo cookies.
The Attorney General’s office in Pennsylvania, the sole overseer of the trust, threatened legal action to have trustees removed unless a new settlement over the governance of the trust was reached prior to July 31.
The agreement imposes term limits of 10 years on trustees. This word came from people requesting anonymity due to the details of the settlement not yet being made public.
Three trustees – James Nevels, Robert Cavanaugh and Joseph Senser – will step down before the end of 2016, said the same people.
Cavanaugh and Senser have been trustees since 2001 and Nevels since 2007.
Velma Redmond the Chair of the board at Hershey Trust, who joined it in 2003, will remain on to ensure strong continuity, but will leave by December 31, 2017, as will James Mead a trustee for the past 9 years.
Mead, Cavanaugh and Nevels are the three reps from the trust who are also on the board of directors at Hershey.
Compensation caps for trustees were also included in the agreement, though they exclude trustees’ salaries at Hershey and its affiliates.
This agreement likely will not please many alumni at the Milton Hershey School that were calling for much deeper reforms, said on prominent alumnus.
Internal dissent as well as turnover has rocked the trust since it reached an agreement on reforms with the AG in 2013.
Joan Steel a trustee resigned in early July after three others had done the same during the last year.
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DJ: Hershey Trust settling with state attorney general over governance
Jul 22, 2016 | Seeking Alpha
By Jason Aycock
The Hershey Trust (NYSE:HSY), facing a court date over governance charges, will settle with Pennsylvania's attorney general to resolve its investigation, according to Dow Jones reports.
That action will include more resignations on its board. Several members of the Hershey Trust board have resigned over the past year, amid a takeover attempt by Mondelez (NASDAQ:MDLZ).
The attorney general has been probing the trust -- a charitable trust that controls the fate of the Hershey Co. -- for excessive spending and letting board members overstay their terms.
Updated 5:58 p.m.: Reuters reports that the deal will put 10-year term limits on trustees, with three trustees (Joseph Senser, Robert Cavanaugh and James Nevels) required to step down by the end of this year, and Chairwoman Velma Redmond leaving by the end of 2017 along with James Mead. Trustees' compensation will also be capped.
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Hershey Trust to Reach Settlement With PA AG
Jul 22, 2016 | CNBC
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