Louis J Sheehan 80028

Trust Head May Mold Hershey's Future
Force Behind Coup
Has Track Record
For Independence
By JULIE JARGON
November 15, 2007; Page C3
The future of Hershey Co. could hinge on a 72-year-old lawyer who quietly fought to keep the corporate icon out of a suitor's hands five years ago -- and is inclined to keep the chocolate maker independent now, too.

LeRoy Zimmerman, a former Pennsylvania attorney general now in private practice at a Harrisburg, Pa., law firm, is the chairman of the charitable trust that controls Hershey. Mr. Zimmerman, who has practiced law since 1960, is the driving force behind this week's board coup at the company, where he is also now a director.

Mr. Zimmerman could wield more clout at Hershey than the incoming CEO, David West, whose future could be uncertain, given that he was selected by members of the previous company board. That board was upended last week, when the trust pushed for the resignations of six company directors.

Over the weekend, two more decided to step down on their own, and on Sunday, the company announced the appointment of eight new members chosen by the trust -- including Mr. Zimmerman. Since then, Hershey's stock has fallen almost 3%. It closed yesterday at $40.21, down $1.86, or 4.4%, on the New York Stock Exchange.

Mr. Zimmerman is described by acquaintances as a straight-shooter who looks people in the eye and insists on being called "Roy." He's been on the boards of four publicly traded companies -- none in the candy business -- and was chairman of Eckert Seamans, a 300-attorney firm with offices in five states.

"Roy is smart enough to know he doesn't have all the background in business, so he knew he needed to surround himself with people who do," says former Hershey CEO Richard Zimmerman -- no relation to LeRoy -- and a current Hershey shareholder who opposed a sale of the company to Wm. Wrigley Jr. Co. in 2002.

The upheaval comes as Wall Street is becoming increasingly anxious to see Hershey exploit its strong brands with bolder steps -- especially overseas -- after a year of sales deceleration and falling profits. That task would be easy if the trust were willing to give up its primacy over the company. But Mr. Zimmerman has proved himself a guardian of the trust's long-term role, crimping the company's flexibility for deal making.

The Hershey Trust controls about 79% of the voting shares of Hershey. CEO Richard Lenny recently announced that he will retire next month, and shortly afterward the trust issued an extraordinary public rebuke of the company's "unsatisfactory" performance.

Mr. Zimmerman declined to be interviewed , as did a spokesman for Hershey. Former and current company board members didn't return calls. Trust spokesman Tim Reeves said the trust's desire to maintain control of Hershey "is not an impediment to identifying, pursuing and achieving dynamic, strategic growth initiatives domestically and internationally."


Mr. Zimmerman made his mark in Hershey, population 12,771, when the Hershey Trust, of which he wasn't then a member, called for Hershey Co. to be put up for sale in 2002. A group of former Hershey Trust board members and former Hershey executives who opposed the sale called on Mr. Zimmerman, thinking his political clout and legal know-how would be helpful. He had been the state's attorney general from 1981 to 1989, overseeing a string of prosecutions on everything from tampered car odometers to mob killings.

"He, along with other advisers, lent a great deal of credibility to our faction, even though it was in private. He helped us sort out the positions we would take," says J. Bruce McKinney, former CEO of Hershey Entertainment and Resorts Co. and a former member of the Hershey Trust board.

After calling off a sale to chewing-gum giant Wrigley at the last minute, several trust board members who had pushed for the sale were removed. Mr. Zimmerman then joined the trust board and now, he has done his own dismantling. One of the new company board members is former Hershey CEO Kenneth Wolfe, who was one of the sale opponents Mr. Zimmerman advised five years ago.

Some investors worry that the new Hershey Co. board may be too cautious as competitors Wrigley and Cadbury Schweppes PLC of London encroach on Hershey's U.S. market. So far, Hershey's only geographic expansion has involved baby steps in the form of joint ventures with international partners.

"Unless there's something truly transformative on the horizon, they're going to be reliant on the U.S. market overwhelmingly for the foreseeable future," says Deutsche Bank analyst Eric Katzman, who has a "hold" rating on the stock; he doesn't personally own shares in Hershey, but his firm does.

Mr. Lenny, the Hershey CEO who's stepping down next month, met with Cadbury Schweppes CEO Todd Stitzer, at Mr. Stitzer's request, in January, according to a person familiar with the matter. In March, Mr. Stitzer told analysts he would be interested in merging Cadbury's confectionery business with Hershey. The Trust board had its own meeting with Cadbury in September, without inviting Mr. Lenny, according to people familiar with the matter. Nothing has come from those meetings and representatives of Hershey, Cadbury and the trust declined to comment on that.

Whether or not Hershey is willing or able to structure a deal with Cadbury in a way that would allow the Trust to maintain control, analysts say the company's profits will take a hit.

Write to Julie Jargon at julie.jargon@wsj.com2