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Hershey Media Report 8/8/16
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Hershey Trust, Milton Hershey School agree to operational changes
Aug 5, 2016 | Legal News Line
By Mark Iandolo
The Hershey Trust Company and the Milton Hershey School have agreed to make significant changes to improve the operation and governance of both entities, Pennsylvania Attorney General Kathleen G. Kane has announced. -
The State AG Report Weekly Update August 4, 2016
Aug 4, 2016 | Lexology
By Cozen O'Connor
Description of the resolution included in Lexology's State AG Report Weekly Update. Relevant portion pasted below. -
The Hershey Governance Settlement; New Governance Principles; Responsible Corporate Officer Doctrine: Corporate Law And Governance Update, August 2016
Aug 5, 2016 | The National Law Review
By Michael W. Peregrine
Discussion of the resolution was included in the Corporate law and Governance Update of this attorney-sponsored blog. Relevant portion pasted below. -
Have S'More Hershey Company?
Aug 5, 2016 | Seeking Alpha
By Christopher F. Davis
It is an amazing dessert by the campfire, consisting of graham crackers, toasted marshmallows and a chocolate bar. I'm talking of course about a S'more. So good. And our chocolate bar of choice always comes from the Hershey Company (NYSE:HSY). Truthfully I had not looked at the stock in over two years before covering it a few months ago. To my surprise, the stock was essentially flat since the last time I looked at it. However, the stock got a jolt when Mondelez (NASDAQ:MDLZ) bid to buy the company for $23 billion. -
Mondelez: Moving Ahead Despite Challenges
Aug 7, 2016 | Seeking Alpha
Brief mention of the possibility of a second Mondelez bid. Relevant portion pasted below. -
Cocoa - Caught Between Demand And A Currency
Aug 8, 2016 | Seeking Alpha
By Andrew Hecht
Brief mention of the Mondelez bid in the context of the cocoa market. Relevant portion pasted below.
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Hershey Trust, Milton Hershey School agree to operational changes
Aug 5, 2016 | Legal News Line
By Mark Iandolo
HARRISBURG, Pa. (Legal Newsline) — The Hershey Trust Company and the Milton Hershey School have agreed to make significant changes to improve the operation and governance of both entities, Pennsylvania Attorney General Kathleen G. Kane has announced.
The Office of Attorney General's charitable trusts and organizations section recently reviewed the operations of both entities. The section exists to protect public interest by making sure charitable assets are used properly.
"All of our efforts that led to this agreement were made to ensure that the vision of Milton and Catherine Hershey remains intact," Kane said. "They had the foresight to establish a deed of trust to provide a superb education for generations of disadvantaged children. The reforms in this agreement will help ensure that continues."
The terms of the agreement include many changes. Among them are requirements that board service for managers be limited to a maximum ten years, certain current managers must retire, new managers cannot be elected without providing 30 days written notice to Kane’s office, and compensation of the directors of the Hershey Trust Company is set at $110,000.
Kane stressed that her office will continue to give oversight to the organizations.
"I have seen firsthand the benefits of this institution and the incredible educational programs that prepare Milton Hershey School students for bright futures," Kane said. "It is imperative for us to continue working to keep the school functioning efficiently, and as Mr. and Mrs. Hershey intended."
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The State AG Report Weekly Update August 4, 2016
Aug 4, 2016 | Lexology
By Cozen O'Connor
Pennsylvania Attorney General Settles with Charity Over Alleged Misuse of Charitable Assets
Pennsylvania AG Kathleen Kane reached a settlement with the Hershey Trust Company and the Milton Hershey School to resolve allegations the charity misused charitable assets.
The Pennsylvania AG’s office began its investigation of Hershey Trust Company following allegations that multiple board members had conflicts of interests and were overcompensated. The AG’s office reached two prior reform agreements with the two entities in 2003 and 2013.
Under the terms of the settlement, the Hershey Trust Company must, among other things, limit compensation for its director and board members, notify and provide résumés to the AG’s office of any new managers or directors, and notify the AG’s office of any real estate transactions over $250,000.
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Aug 5, 2016 | The National Law Review
By Michael W. Peregrine
The Hershey Governance Settlement
On Friday, July 29, the Pennsylvania Attorney General, the Hershey Trust Company and the Milton Hershey School, entered into a written settlement resolving an investigation conducted by the Attorney General concerning certain governance practices of the two entities. The high profile of both the parties and of the investigation, and the terms of the settlement, are worthy of health system governance committee review.
The investigation had been prompted by Attorney General concerns with Hershey compliance with a previous 2013 settlement between the parties on certain governance related issues. The key terms of the 2016 settlement reflect the particular focus of the Attorney General’s scrutiny. Those terms included ten year term limits for board members; mandatory performance evaluations; the resignations of five individual directors; required notice to the Attorney General on board nominations and a best efforts commitment to nominate candidates with appropriate education, training and experience; limits on director compensation; limits on cross-directorships with other Hershey-related entities; and clarifications to the existing Hershey conflicts of interest policy.
The settlement brings to a close what has been to date one of the most prominent governance controversies in the nonprofit sector. While the terms and conditions set forth in the settlement reflect the measures deemed necessary by the Attorney General to protect the charitable interests, they should not be viewed as per segovernance “best practices.” The more significant lesson to nonprofit health systems from the settlement is the extent to which state charity officials will scrutinize and investigate charitable organizations where deemed necessary to preserve charitable assets—and the financial, operational and reputational costs (to both the organization and to individual directors) arising from such scrutiny.
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Aug 5, 2016 | Seeking Alpha
By Christopher F. Davis
It is an amazing dessert by the campfire, consisting of graham crackers, toasted marshmallows and a chocolate bar. I'm talking of course about a S'more. So good. And our chocolate bar of choice always comes from theHershey Company (NYSE:HSY). Truthfully I had not looked at the stock in over two years before covering it a few months ago. To my surprise, the stock was essentially flat since the last time I looked at it. However, the stock got a jolt when Mondelez (NASDAQ:MDLZ) bid to buy the company for $23 billion. As we know, this is a premier candy and snack brand. It's a global name. We don't need to dig into the brands. You should be familiar with it them now. In a world where healthy eating is more popular than ever, it creates problems for a name like this, but the company adapts. It markets effectively. This is a global public food company. It isn't going anywhere. It will be around for many years to come. But after the recent "melt-up" in the stock, can you really consider buying here?
Well the company has just reported second quarter 2016 results. Now before delving into them let me say like so many domestic companies with international exposure I anticipated currency headwinds. Hershey's did not escape this headwind. Let's start with sales. Net sales were $1.64 billion, and actually rose 3.7% year-over-year. Of course currency accounted for a 0.8% headwind, so on a constant dollar basis sales were up 4.5%. This also beat estimates by $30 million.
I think that the issue of currency is still a risk but it has been tempered over the last year. Further the company has pricing power but this was more than offset by increased levels of direct trade resulting in a net price realization headwind of 0.5 points. Volume was up 3.1 points due to sales growth and better than expected timing on some North American shipments. There was a positive impact from acquisitions and divestitures of 0.5 points. Another thing to note was that total advertising and related consumer marketing expense increased about 5% versus Q2 2015. As we move into Q3, keep an eye out here, because Hershey's is now a sponsor of the Olympics for the first time in its 122-year history. I will add that selling, marketing and administrative expenses also declined about 2.6% in the quarter. Margins dipped slightly to 45.7%. But the strong performance led to Q2 earnings of $0.68, and after making adjustments, $0.85. This beat estimates by a strong $0.05.
But can you buy here? The stock has been great for trading, but hasn't moved in years until the Mondelez offer. For the stock to move higher we need to see higher sales and earnings (or at least expect them) and see increases to shareholder friendly policies like dividends and buybacks. We did see a dividend hike of 6%. That is strong. Looking ahead, the company expects constant dollar sales for 2016 to grow 2%. Earnings after adjustments should grow 4% to $4.24 to $4.28. Is this growth worth a buy here when the stock is trading at a premium multiple? I don't think so. The name in my opinion was a buy under $84 based on expectations for earnings, based on yield protection, and based on historical trading patterns when I covered the name three months ago. We are over 27 points higher than that mark. Despite the positives for the company, the stock is a hold.
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Mondelez: Moving Ahead Despite Challenges
Aug 7, 2016 | Seeking Alpha
Moreover, MDLZ can increase its bid price to $120 per share to acquire HSY, after HSY rejected the bid of $107 per share. However, to complete the deal, MDLZ will need to get approval from Hershey Trust and the Attorney General's office of Pennsylvania. If MDLZ goes ahead and increases the bid price to acquire HSY, through equity financing, I believe the company can increase its cost savings targets which will boost its stock price.
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Cocoa - Caught Between Demand And A Currency
Aug 8, 2016 | Seeking Alpha
By Andrew Hecht
For now, the downside risk in the cocoa market is a further deterioration in the value of the British pound against the dollar. However, a lower dollar price for cocoa is likely to increase demand for the commodity. The weak pound could be presenting us with a golden opportunity for the future in cocoa. Demand is going nowhere but higher. That is why Mondelez (NASDAQ:MDLZ), with a $66 billion market cap, recently made a $23 billion bid for Hershey (NYSE:HSY).
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