Product Overview

The proposed sale of Hershey Foods during the summer of 2002 captured headlines and imaginations. Six months after making its decision to explore a potential sale, the board of the Hershey Trust Company was examining two serious offers: a joint bid from Cadbury Schweppes PLC and Nestlé S.A., and an independent bid from the Wm. Wrigley Jr. Company. In essence, the board faced both an economic and a governance decision. On the economic side, the board needed to determine the value of Hershey as a stand-alone entity compared with the bids being offered. On the governance side, the board needed to decide whether selling Hershey compromised the board’s original mandate from Milton Hershey. A teaching note is available for registered faculty; media supplements and faculty and student Excel spreadsheets are available to enhance student learning.

Learning Objectives

Exploring the unusual corporate-governance and ownership issues affecting a company with a long history of community involvement. Comparing the discounted-cash-flow (DCF) method with industry comparables as a means for evaluating a company. Using the DCF methodology to assess the impact of assumed synergies on firm valuation by bidding companies. Examining the complexities of international mergers and acquisitions. Highlighting the importance of stakeholder interests in corporate decision-making.