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Potential Sale of Hershey Proves Importance of Ownership
Our Buy American Mention of the Week!
by Roger Simmermaker
August 31, 2002

Not since British-owned Cadbury Schweppes PLC teamed up with French-owned Groupe Danone SA to make a bid for Nabisco earlier this year has such a large, traditional American company been at risk of being acquired by a foreign company. Fortunately, American-owned Kraft was able to outbid the foreign alliance and keep American assets American.

This time around, American icon Hershey is the target. The developments over the past week or so, plus the comments made by politicians, potential acquiring companies and hometown folks in Hershey, PA underscore what is at stake here. We are obviously talking about more than a simple change of ownership from American-owned Hershey to Swiss-owned Nestle. Nestle seems to be the front-runner in the bid to take control of Hershey, followed by American-owned Kraft and British-owned Cadbury.

It is indeed refreshing to see some of the hidden negative aspects of mergers and acquisitions brought to light such as destabilizing communities, which can wreak havoc on local economies. The firestorm of community protest has mandated certain "social constraints" at minimum be considered for any deal to go through. This does not mean, however, that the majority of the Hershey community wants any takeover to occur. It means the community is sending a message to any proponents of a sale that more is at stake here than just percentages and dollar signs on a corporate financial document.

GOP Attorney General Mike Fisher (now running for governor of Pennsylvania) reportedly had a lead role in propagating the idea that Hershey should either look to "diversify" or put itself up for sale in the first place. A grass-roots campaign in the town resulted in a flood of complaints to the attorney general, pressuring Mr. Fisher to ask for a temporary restraining order to block any sale while the potential impact to the community could be considered. The attorney general also suggests in the court order that Hershey may be the victim of "irreparable harm" if a sale was to proceed.

While Mr. Fisher has been accused of lighting a fire so that he could be the one to extinguish it, the fact remains that he has most likely changed his tune to match that of the voters who will select Pennsylvania's next governor. Fisher's switch to opposing the sale has caused some of the board members of Hershey's Trust Company to reconsider their original backing of the idea.

With all this going on, it wasn't until today - Friday, August 30 - that the CEO of Nestle made his first public comments on the proposed deal, and he didn't sound too positive that the sale was likely. Peter Brabek, Nestle's chief executive, said he thought the sale would likely be blocked because of antitrust concerns since Hershey has 43% of the U.S. chocolate market and Nestle has 12%. According to the Swiss executive, "It's fantasy to think that you would get regulatory approval in the U.S. to combine 43% with 12%."

One can only hope that the town of Hershey and surrounding Pennsylvania citizens will keep up the pressure to block the sale of this American icon. Even if the sale ends up going through, it's a good chance to show that the impact to Main Street is just as important, if not more so, than the impact to Wall Street.


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