By Annie Gasparro
Hershey Co. Chief Executive J.P. Bilbrey announced plans Friday
to step down, following months of failed negotiations to sell the
company to Mondelez International Inc., making him the third person
to leave the candy maker's top job in the past decade.
Mr. Bilbrey, 60, will retire as chief executive next July to
spend more time with his family but remain as chairman, he said.
Hershey said it is searching for a successor.
The leadership shake-up comes seven weeks after Oreo cookie
maker Mondelez ended its pursuit of the chocolate company. Hershey
rejected two bids from Mondelez over the summer, hoping for a
higher price for iconic brands like Reese's peanut butter cups and
chocolate Kisses.
Two people close to the company's controlling shareholder, the
Hershey Trust Co., said trying to negotiate a deal could have
raised tensions between Mr. Bilbrey and members of the trust's
board who opposed a sale.
The trust said Friday that Mr. Bilbrey "guided the Hershey Co.
with sound judgment and good business sense." A Hershey spokeswoman
said Mr. Bilbrey chose to leave his job and wasn't under pressure
from the trust.
"While there is never a best time for a leadership transition, I
do believe now is the right time to start the process," Mr. Bilbrey
wrote in an email to Hershey employees Friday.
But the timing of his departure comes as the Pennsylvania-based
chocolatier attempts to evolve into a more diversified snack
company and the trust's board looks to avoid extra attention,
months after state regulators concluded an investigation into their
handling of Hershey dividends.
Hershey's disbursements and the trust's other investments
generate billions of dollars in revenue for a boarding school for
poor children in Hershey, Pa., as well as other charitable
endeavors. The Pennsylvania Attorney General this year investigated
whether the trust's board members were receiving excessive
compensation or ignoring conflicts of interest over some of the
trust's beneficiaries.
The Attorney General and the trust reached a settlement in July,
agreeing to make governance changes including the resignation of
several board members. James Nevels, who agreed to step down from
the trust at the end of the year, has sat on the trust board and
the Hershey board since 2007. Hershey said Friday that he won't
stand for re-election on the company's board either.
The trust could install one of its current board members to fill
Mr. Nevels's spot as a company director. Back in 2007, the trust
installed eight of its own picks as Hershey directors, flexing its
muscles in front of an new, incoming CEO.
The Wall Street Journal has reported that disagreements with the
trust contributed to the departure of Hershey's two previous
CEOs.
David J. West stepped down in 2011, in part over a disagreement
with the trust over whether to bid for Cadbury PLC. Mr. West's
predecessor, Richard Lenny, stepped down in 2007 after multiple
clashes with the trust's board. In one instance, the trust blocked
a potential deal that Mr. Lenny pursued with Wm Wrigley Jr. Co. in
2002 after the state attorney general fought against it.
Both Mr. West and Mr. Lenny left their posts within three months
of their announced departure.
Mr. Bilbrey, who joined Hershey from Danone in 2003 and replaced
Mr. West as chief executive in 2011, encouraged the negotiations
with Mondelez that began earlier this year. He said in a letter to
employees that Hershey needs to move "beyond core confection into
broader snacking categories."
Hershey didn't make Mr. Bilbrey available for comment on Friday.
"Luckily for me at least, July is a long way away, and until then I
will remain involved with the business with the support of a great
management team," he wrote in his email to Hershey employees.
Some corporate-governance specialists questioned why he would
announce his exit so far in advance if his family's concerns were
pressing.
Roger Dennis, dean of Drexel University's law school, said he
suspected conflicts within the trust crimped Mr. Bilbrey's
effectiveness in the boardroom.
"A CEO's ability to be a strategic leader of the entity has to
be difficult in this context," Mr. Dennis said.
Edward Jones analyst Jack Russo said the change in leadership
doesn't make a sale of the company more likely. Some people view
Hershey as unsalable because of the trust's strong control and
because any deal would also essentially require approval from
Pennsylvania's attorney general.
Hershey said it would review internal and external candidates
for chief executive. Industry analysts expect Hershey's Chief
Operating Officer and head of North America Michele Buck to be the
leading contender.
Ms. Buck, who joined Hershey in 2005, has more than two decades
of experience in branding and marketing at Frito Lay, Kraft,
Nabisco and Hershey. Hershey promoted Ms. Buck to chief operating
officer in June, adding Hershey's operations in Central and South
America to her responsibilities.
Mr. Bilbrey's departure also reflects challenging times for
candy makers. Chocolate and candy sales in the U.S. are under
pressure from consumers' turn toward healthier foods. Hershey
recently introduced dried meat bars, made from dried meats and a
combination of other ingredients such as mangos, cranberries and
quinoa.
The company on Friday reaffirmed its full year outlook and plans
to report quarterly earnings later this month. Shares of the
company rose 78 cents to $96.43; before Friday, the stock had
gained 1.4% over the past year.
--Joann S. Lublin and Austen Hufford contributed to this
article.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
October 15, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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