Hershey On The Block?

Hershey Foods Co., the largest U.S. candy and chocolate maker, is exploring a sale of the company.

The Wall Street Journal reported that an auction of the maker of such top-selling candies as Hershey's Kisses, Kit Kat bars, Twizzlers licorice sticks and Reese's peanut butter cups could fetch more than $10 billion. Based on the closing price of Hershey stock on Wednesday, the company's market capitalization is more than $8.6 billion.

Hershey shares were at $66.25 in pre-open trading, up 6 percent from their Wednesday close.

The decision to put the company on the block comes after the Milton Hershey School Trust, which owns about a third of Hershey's stock but controls 77 percent of the voting power, rejected management's proposed alternatives to a sale, Hershey said.

"Clearly, the Hershey Foods board of directors would have preferred to keep Hershey Foods as an independent company," Hershey Chairman, President and Chief Executive Richard Lenny said in a statement.

But the trust concluded that a possible sale of the company was the most prudent course of action consistent with its obligations to the Milton Hershey School, the company said.

"While it is approaching the prospect with reluctance, the trust has concluded that exploring a possible sale of the company is the best way to accomplish the trust's diversification objectives and maximize value," trust Chief Executive Robert Vowler said in a statement.

Given the trust's determination to seek a sale, the Hershey board said it and the trust would cooperate in the effort to find a buyer.

The trust is the sole benefactor of the Milton Hershey School, established in 1909 by Hershey Foods founder Milton Hershey. About 1,200 disadvantaged children attend the school, the trust said.

The trust and other charitable foundations are under intense pressure to diversify their holdings amid the stock market downturn and the spate of corporate scandals that have brought the downfall of big companies such as Enron Corp., WorldCom Inc. and Adelphia Communications. About half of the trust's assets are in Hershey shares, the trust said.

The decision also comes amid a big wave of consolidation in the food industry, which has seen the sale of such companies as Nabisco, Ralston Purina and Best Foods to multinational food conglomerates.

It also follows on the heels of the longest factory-worker strike Hershey has ever endured. The dispute was settled last month after a six-week walkout by 3,000 employees.

Hershey shares closed Wednesday at $62.50 on the New York Stock Exchange, up $2.67 on the day.

The company has hired investment bankers UBS Warburg and the law firm Sullivan & Cromwell to advise it, while the trust has retained Morgan Stanley and Skadden, Arps, Slate, Meagher & Flom as its advisers.