The controlling trust of Hershey Foods yesterday took legal action in an attempt to head off court moves aimed at blocking the sale of the US's biggest chocolate maker.
The Hershey counter-motion is a response to Pennsylvania attorney-general Mr Mike Fisher, who filed for an injunction with the Dauphin County Orphans' Court on Friday, claiming that a sale of the iconic company could harm the surrounding town of Hershey, Pennsylvania.
The attorney-general's motion is a sign of growing opposition to the proposed sale, which would be the biggest deal in the food industry since 2000.
But the Milton Hershey School Trust, which controls 77 per cent of voting rights of Hershey Foods, argues that exploring a possible sale is in keeping with its fiduciary obligations.
The trust, like many charitable trusts in the US, is seeking to diversify its investments after steep falls in equity markets and a string of corporate scandals.
The escalating legal battle comes as potential bidders grow increasingly concerned that the trust will back down from the planned sale of its shareholding.
Nestlé, the Swiss food group, and Kraft of the US have both expressed an interest in buying Hershey, and are thought to be conducting due diligence on the company, though no binding offers have been submitted.
However, the bidders believe the trust may back away from a sale unless it receives a premium price for its stake, people close to the negotiations said.
A spokesman for the trust denied suggestions that trustees were wavering in their support for a sale. He said the trustees had so far only agreed to explore a sale and would decide whether to proceed on the basis of the bids they received.
The trust also said the attorney-general's motion failed to show that a sale would cause "irreparable harm" to the community, which would be required under Pennsylvania law to halt a sale.
It denied Mr Fisher's claim that it was moving too quickly with the proposed sale, as at least 60 days would be required to complete any deal even after an acceptable bid was received.
But the mounting opposition to a sale from politicians, unions, former Hershey trustees and alumni of the Milton Hershey School, the beneficiary of the trust, is starting to raise doubts over whether a deal will happen.
When the trust first announced its intention to explore a sale, analysts predicted a closely contested auction for the business, one of the few remaining US consumer goods groups with market-leading products.
The auction has failed to materialise as suitors balked at the prospect of bidding against Nestlé. The Swiss group's control of the rights to Kit Kat, bwhich is distributed by Hershey in the US, has also scared off bidders. - (Financial Times Service)
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