Hershey attempt to delay sale

Food giant Nestle said on Monday that a closely watched court hearing on delaying the planned sale of US chocolate maker Hershey is unlikely to be the last word in the controversial transaction.

A US court will hear on Tuesday a request from Pennsylvania Attorney General Mike Fisher to temporarily stop the process of selling Hershey, for which Nestle is seen as a prime suitor.

"It is certainly not the final step,"​ Nestle spokesman Marcel Rubin told Reuters, countering talk that the judge could deal the sale a near-fatal blow by holding up the process.

"On the one hand you could have the court saying we dismiss the Attorney General and the (sale) goes on. But then the Attorney General could make an appeal which puts it in another dimension, and the reverse is exactly the same,"​ he added.

A $10 billion-plus (€10.2bn) sale of the famed maker of Reese's Peanut Butter Cups is running into opposition on fears that a new owner would close plants and lay off workers in a town so linked to the firm that its streetlights are shaped like Hershey's Kisses.

Hershey was put on the block last month by the Milton Hershey School Trust, the top shareholder. The case will be heard by the Dauphin County Orphans Court, which has jurisdiction over trusts.

Rubin said that Nestle would not intervene in the legal process, as it was a matter between the Attorney General, the court and the trust. He would not comment further.

Fisher, a Republican running for governor, wants to stall any negotiations until the court can hear a second request that would require any deal to be cleared by the court.

The trust initially said it wanted the company to explore a sale to help diversify its stock holdings but the political storm that has swept Hershey, known as the sweetest town in America, has left some trust members with cold feet.

Nestle makes Nescafe coffee, Friskies pet food and top chocolate brand KitKat, also made under licence in the United States by Hershey. The lucrative brand is expected to revert to Nestle in the event of Hershey's sale, giving Nestle pole position in the takeover battle, analysts say.

British newspapers reported over the weekend that Cadbury Schweppes held talks with Nestle on teaming up for a joint bid with Hershey although sources played down the talk.

Nestle's Rubin refused to comment.

Like Nestle, Cadbury would like to get Hershey's high-margin business, but is seen lacking the muscle to pull off the deal. Some bankers say it has already dropped out.

Kraft Foods is seen in the running but sources say it is leaning against a bid, leaving the way open for Nestle.

Cash-rich Nestle could afford to go it alone but Chief Executive Peter Brabeck said last week it would likely run into regulatory problems as a joint Hershey-Nestle operation would control over half of the US chocolate confectionery market, the world's largest.

Nestle acknowledges that in order to avoid any potential anti-trust issues a joint offer could be made, with all sorts of permutations possible with or without Nestle.

However, US competition lawyers said that Nestle could be just trying to talk down any bid price with the comments. Even though a Nestle and Hershey combination would create a chocolate confectionery giant, the FTC has played down the significance of focusing on market share alone, they noted.

Nestle is a weak number three in the US market behind Hershey and M&Ms maker Mars. Analysts say a Nestle swoop was logical given Hershey's better margins, potential synergies, and Nestle's goal to be number one or two in every business.

Nestle's shares softened on Monday, down 1.6 percent at 317 Swiss francs, and was bettered by European rivals.

Nestle shares have been under pressure through much of August on fears it would overpay for Hershey but leapt almost five per cent on Friday when its CEO talked down any bid price.

Nestle would lose its top credit rating on any Hershey acquisition, agency official say, after its recent buying spree, which includes a $10 billion deal for US pet food producer Ralston Purina, in the fast consolidating food sector. (Additional reporting by Tom Bergin in London and Tom Johnson in New York)