Mondelēz may make second Hershey bid as five Trust members to leave

Hershey Trust must have 13 board members eventually.  Five out of nine current members will step down under AG agreement..©iStock/tupungato

Mondelēz may make another bid to acquire Hershey as five board members are set to step down under an agreement with the Pennsylvania Office of Attorney General (AG), says the author of a book on the Hershey Trust.

Bob Fernandez, author of The Chocolate Trust: Deception, Indenture and Secrets at the $12 Billion Milton Hershey School, expects Mondelēz to make another play for Hershey after Hershey rejected its $23bn takeover earlier last month.

It comes as the AG reached an agreement with the Hershey Trust - which has 80% voting rights for Hershey. The agreement was reached on July 30 in the Orphan’s Court Division of the Dauphin County Court.

The AG had been investigating spending patterns by Hershey Trust board members.

Hershey Trust Company

The $12bn Hershey Trust Company was founded in 1905, and it serves as the trustee for the Milton Hershey School Trust, and owns a controlling interest in the Hershey chocolate company, according to the Trust's website. The Trust currently has nine board members with Velma Redmond as the chairperson, and Joseph Senser as the vice chairman. Other seven members include: James Brown, Robert Cavanaugh, Robert Heist, M. Diane Koken, James Mead, James Nevels, David Saltzman.

"All of our efforts that led to this agreement were made to ensure that the vision of Milton and Catherine Hershey remains intact," attorney general, Kathleen Kane, said in a statement. "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."

Majority of board members to step down

The Trust has faced criticism in recent years for extravagant spending.

Ex-board chairman Robert Cavanaugh is one of the three board members that will leave the Trust. The other two, according to a statement made by AG, are Joseph Senser and James Nevels. In addition, James Mead and Velma Redmond (the current Trust chairman) will leave no later than Dec 31, 2017.

Facing an exodus of directors over the next 17 months, the Trust board now will have to find new directors to replace those departures, according to Fernandez.

The court agreement also shows that prior to the election of any new manager/director, the Hershey School and the Hershey Trust company must now give the Office of Attorney General 30 days written notice, “including a resume of the candidate's education, experience and relationship, if any, to incumbent managers/directors.”

The agreement also stipulates that the Trust board should have 13 members. This will require the appointment of nine new board members over time, Fernandez said.

What does the chairman say?

Upon the agreement with the Office of AG, Redmond also penned an open letter, saying that the board was “satisfied with the outcome”.

He added that the joint boards with AG now move forward, working collaboratively, as “we direct, support and fulfill the ongoing mission of the Milton Hershey School”.

Redmond pointed out that the Hershey School is performing at exceedingly high levels, and will continue to grow its enrollment towards 2,300 students with construction already under way on its North Campus expansion site.

Is Mondelēz taking advantage of board changes?

“This year's turmoil in Hershey may have provided an opening for Mondelēz to begin discussions on acquiring the chocolate company,” Fernandez said.

“Another view is that the bitter feelings among board members could paralyze decision-making and make it difficult to do anything over the next several months," he continued.

“Mondelēz has not said it lost interest in Hershey and many believe it could make another pass at it now that the attorney general has concluded its investigation with Friday's agreement,” he added.

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Comments (1)

United Orphan Army - 05 Aug 2016 | 03:49

Sustainable Plan of Expansion

Dear First Deputy AG Bruce Castor: Where is the permanent reform? Where is the sustainable plan of expansion? The embarrassment of riches continues - 2000 adults serving 2000 otherwise impoverished orphans at a cost of $110,000 per otherwise impoverished orphan per year. Sale of The Hershey Company would further demonstrate the need for the development of a sustainable plan of expansion. As already stated: Source documents [ www.facebook.com/groups/HISAA/files/ ] make clear that all of the current Managers were complicit in their ongoing intentional violation of the 2013 Agreement, abuse of the Hershey Trust, and defiance and further acts of marginalizing the authority of the PA OAG. The PA OAG’s decades of continued failure to remedy this calls into question whether the PA OAG career politicians will fulfill their oaths of office and their role as parens patriae (protector of the public), particularly when it comes to protecting otherwise impoverished orphaned children and their rights. All Managers should have been (and must be) removed and permanent reform implemented consistent with Milton Hershey's original intent. A sustainable plan of expansion to serve a far greater number of additional orphans on a cost effective basis must be developed and should have been developed decades ago. If not for this, then why are the Managers deriving compensation? We believe that Mark A. Pacella, Chief Deputy Attorney General, Charitable Trusts and Organizations Section, is well aware of this and did recommend such permanent reform. After all, the Managers had been intentionally violating the 2013 Agreement, abusing the Hershey Trust, and defiant of the authority of the PA OAG. So the only open question was: what will the career politicians do with Chief Deputy Pacella’s recommendation for permanent reform? If the career politicians don't implement permanent reform consistent with Milton Hershey’s original intent, Pennsylvania citizens must repeal the parens patriae concept as being nothing more than a truly "legal fiction". Bruce Castor – as parens patriae, where is the sustainable plan of expansion to serve a far greater number of additional orphans on a cost effective basis? For updates and more visit https://www.facebook.com/groups/HISAA/, www.facebook.com/Reduphersheytrust/, and www.facebook.com/groups/HISAA/files/ /s/ United Orphan Army

05-Aug-2016 at 15:49 GMT

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