HERSHEY FOODS CORPORATION:
BITTER TIMES IN A SWEET PLACE

Teaching Note

Synopsis and Objectives

The proposed sale of Hershey Foods Corporation (HFC) during the summer of 2002 captured headlines and imaginations. After all, Hershey was an American icon, and when the company’s largest shareholder, the Hershey Trust Company (HSY), asked HFC management to explore a sale, the story drew national and international attention. The company’s unusual governance structure put the Hershey Trust’s board in the difficult position of making both an economic and a governance decision. On the one hand, the board faced a challenging economic decision that centered on determining whether the solicited bids provided a fair premium for HFC
• Use the DCF methodology to assess the impact of assumed synergies on firm valuation by bidding companies.

• Examine the complexities of international mergers and acquisitions.

• Highlight the importance of stakeholder interests in corporate decision-making.

To give full attention to both the stakeholder and valuation issues normally will require that the case be taught over two 80-minute periods. The first class may be structured to focus primarily on the stakeholder problem. It is for this problem that the video supplements bring critical content and perspective to the students. If the instructor chooses to teach the case primarily for its firm-valuation aspects, however, many of the video supplements can be skipped, allowing the case to be taught effectively in a single 80-minute period. This note provides outlines for both a one-day and a two-day format, together with study questions for each. See Exhibit TN1 for a summary of the video segments suggested for both formats.

The “Introduction” video segment is particularly effective when used before the students read the case. The director of the Hershey Community Archives describes Milton Hershey’s design of the trust and how he envisioned the school, the company, and the town as integrated pieces of his overall vision. This short segment quickly brings to life the nonfinancial issues of the case and serves to present the