Herce Case


  1. Assume that you are a member      of the Hershey Trust board. To whom (or what) do you owe your fiduciary      responsibility? How does the legacy of Milton S. Hershey affect your      thinking as a member of the board? Discuss the unique      challenges presented by the ownership structure of Hershey.
  2. Based      on your valuation of HFC, do you believe the company was fairly valued by      the market before the announcement of the sale? Calculate the WACC for HFC      using the data provided in the exhibits; assume a Market Risk Premium of      5.5%. Estimate the stand-alone value of HFC using the free-cash-flow      projections provided in case Exhibit 10.
  3. Discus      the non-price considerations of the offers. Which, if any, bid would you      vote to accept for the purchase of Hershey Foods Corporation? Is your      decision primarily based on the economics of the bids or the desire to      honor the legacy of Milton S. Hershey?
  4. If      you decided to reject both bids and not sell HFC, what will you do to      achieve the diversification objective? If you decided to accept one of the      bids, what (if anything) would you want to communicate to the constituents      who opposed the sale?
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