Hershey may rise on axing directors

Hershey Co, the US chocolate maker whose chief executive officer resigned last month, may rise in New York trading after the trust that controls the majority of its shares replaced eight of 11 company board members.

Six independent directors resigned at the trust's request, and two more left separately, the Hershey, Pennsylvania-based company said on Sunday in a statement. The biggest US chocolate maker elected former Chief Executive Officer Kenneth Wolfe as non-executive chairman.

Hershey Trust's overhaul of the board follows four quarters of declining net income and an 18 percent drop in the stock this year. Analysts including Sanford C. Bernstein's Alexia Howard said the shares may jump as investors speculate about the board's options, including a sale of the company.

"This is clearly the strongest indication that the trust wants to be more involved in the future at this point in the company's history," said Howard, who has a "market perform" rating on the shares. "I do not think the trust is going to roll over and sell."

Third-quarter earnings fell unexpectedly at the maker of Hershey Chocolate Bars and Reese's Peanut Butter Cups as milk prices climbed. Hershey lowered its annual earnings and sales forecasts last month after its market share dropped 1.1 percentage points in the quarter, while Mars Inc, the maker of M&Ms, won sales.

Hershey spokesman Kirk Saville said the company would have no comment beyond the statement.

'Action's sake'

"This seems like action for action's sake," said Walter Todd, a principal at Greenwood Capital Associates LLC in Greenwood, South Carolina, who sold his shares earlier this year. "It's the equivalent to me of your baseball organization where the players are playing miserably and you fire the managers without firing any of the players."

Wolfe retired from Hershey in 2001 after serving as chief financial officer, chief operating officer and CEO during 34 years with the company, according to the statement. He will become non-executive chairman on January 1. The eight new directors start immediately, the company said.

"It is our overarching goal to make sure that we have a smooth and seamless transition," David West said in the statement. He will become chief executive officer on December 1 upon the retirement of Chairman and CEO Richard Lenny, who said on October 1 he was stepping down.

Bloomberg News

(China Daily 11/13/2007 page16)