MDLZ Mondelez International Inc

By Annie Gasparro 

HERSHEY, Pa. -- This town runs on chocolate.

From the roller coasters at Hershey Park to the butterfly conservatory at Hershey Gardens, Hershey, Pa., was literally built on the generosity of its founder, the iconic chocolatier Milton S. Hershey.

Seven decades after his death at the age of 88, the eponymous maker of Hershey's Kisses and Reese's Peanut Butter Cups still employs 4,500 people in a close-knit community surrounded by farmland. The related entertainment company draws 8,000 more full- and part-time workers into the town of 14,200 people.

No wonder, then, that Hershey residents fret the tap might run dry if Hershey Co. is sold or merges with a suitor such as Mondelez International Inc., the Oreo cookie maker that offered on June 30 to buy Hershey for $23 billion. Hershey's board rejected the bid.

"Who knows what happens to all that if the company is sold? That's what worries people," said Ken Rawley, who grew up in Hershey, where his father was a sales and marketing executive at the company. Mr. Rawley has since moved to New York and works for a boat company.

Hershey is a holdout from a bygone American era, when some 2,000 towns sprang up to serve one particular coal mine, textile factory or slaughterhouse. Many have faded as factories moved overseas and technological advancements led to job cuts.

The coal-mining town of Lynch. Ky., built by U.S. Steel in 1917, saw its population start to plummet in the 1950s from a peak of 10,000 as the industry mechanized. As of the 2010 U.S. census, there were 747 people left in Lynch. Archer Daniels Midland Co. recently left its longtime home of Decatur, Ill. for trendier pastures in Chicago, hurting fancier restaurants and hotels that catered to the commodities giant's executives and white-collar visitors.

Belgium-based InBev purchased Anheuser Busch in 2008. The beer giant had cut some 2,000 jobs in the St. Louis area -- AB's headquarters -- by the end of 2011, and started a yearslong squabble over who would operate a beloved local nature reserve. St. Louis-area residents face another potential blow with Bayer AG's percolating bid for seed giant Monsanto Co. -- a major employer and charitable donor that could depart if it gets acquired.

The same fate hasn't befallen Hershey, where Kisses-shaped lamps burn bright above the downtown intersection of Chocolate and Cocoa Avenues. "Hershey seems as prosperous and welcoming as ever," said Hardy Green, author of "The Company Town: The Industrial Edens and Satanic Mills That Shaped the American Economy." He added, "People in the town of Hershey are reluctant to say anything bad about the company because they're afraid of what will happen."

Hershey's resilience is due largely to the unusual strength of Hershey Trust Co., a secretive body of about 10 members that oversees a $12 billion endowment, charitable and entertainment institutions across Hershey, and 81% of the chocolate maker's voting shares.

Milton Hershey founded the trust over a century ago, mainly to look after the Milton Hershey School for some 2,000 underprivileged children. It still does that, but today the trust also owns a resort and spa, an amusement park and a real-estate company in town.

The trust enjoys an unusual relationship with state leaders. Pennsylvania law requires the state's attorney general to oversee the trust's major investment decisions, including a possible sale. Democrat Josh Shapiro and Republican John Rafferty are running for the open state attorney-general seat, and Hershey has become a campaign issue. "I will vigorously protect Hershey's continued success in Pennsylvania," Mr. Shapiro said.

The latest offer from Mondelez, formerly Kraft Foods Inc., included concessions to call the combined company Hershey and make the town its chocolate headquarters. That hasn't stifled concerns in Hershey that jobs would leave.

Mondelez told worried Britons that its acquisition of Cadbury in 2010 would preserve a local factory that had been slated for closure. After inking the deal, Mondelez closed the factory after all.

Hershey Co. has also disappointed its citizenry in the past. A few years ago, Hershey closed its original factory, built under smokestacks that still proclaim the company's name, indicating to visitors that they've come upon "the sweetest place on earth." A more mechanized facility nearby employs 500 fewer people than the old plant.

John Foley, a Milton Hershey School alumnus who sits on the town's board of supervisors, said despite downsizing, Hershey residents still see the company as their "golden goose."

"They should never sell it. Even if the headquarters stayed here, we'd lose our power," he said.

Brad Reese, the grandson of the creator of Reese's Peanut Butter Cups, which Hershey bought in 1963, spent his early years in what he calls "this very insular town." He swam in the pool at the Hershey-built community center, and drank milk from the Hershey-owned dairy.

"It's a honey pot," said Mr. Reese, "the hand that feeds."

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

August 15, 2016 19:04 ET (23:04 GMT)

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