Pa. official should keep his hands off Hershey sale


PENNSYLVANIA Attorney General Mike Fisher has sworn to uphold the laws of that commonwealth and "discharge the duties of my office with fidelity."

One of those laws, the first article of the state's constitution, affirms Pennsylvanians' right of "acquiring, possessing and protecting property."

Thanks to Fisher, valuable property owned by the charitable Hershey Trust in Hershey, Pa., is in serious jeopardy, at least temporarily.

By moving to block the trust's sale of stock in Hershey Foods Corp. to Nestle or somebody else, Fisher has interfered with the charity's duty and harmed the interests of the orphans and other unfortunates the trust benefits.

Wall Street says the charity's Hershey stock is worth more than $5 billion. But if the government prohibits a deal, the shares aren't much more than paper in a file drawer, although they do pay a 1.8 percent dividend.

"We think it's time the court put a halt to this sale," said Fisher, whose state is getting a reputation for this sort of thing. "We are concerned about the speed in which the Hershey Trust seems to be moving forward with their plans."

The court listened. On Wednesday, Dauphin County Orphans Court Judge Warren G. Morgan issued a temporary ban on any sale, pending further hearings. Wall Street seems to think some sort of deal will eventually go through, but substantial damage has been done.

Any time politicians meddle in corporate transactions, ice water creeps over the toes and insteps of bidders. The zeal of Nestle, Kraft and Cadbury Schweppes for a Hershey acquisition has reportedly waned in recent weeks, and Hershey stock has fallen from almost $80 to $74, reflecting the market's belief that the deal will fail or won't fetch the highest possible price.

Fisher's concern, other than to get himself elected governor, is that a buyer could keep Hershey's brands but dump Hershey's employees, turning "The Sweetest Place on Earth," just east of Harrisburg, into a ghost town with a really well-endowed charity.

Founded in 1894, Hershey Foods employs about 6,000 people in central Pennsylvania and 14,000 companywide. Controlling stock in the company is owned by the Hershey Trust, which runs the local Milton Hershey School, set up in 1909 by the company founder of the same name to deliver free education to orphans and other poor kids.

Apparently suffering from Enron-inspired worries, the trust has decided to end its heavy reliance on Hershey stock by peddling the shares and using the cash to diversify. This is the trustees' right and possibly their solemn duty, as outlined in legal papers drawn up decades ago.

Fisher argues that the community of Hershey would suffer "irreparable harm" from the sale of its eponymous company, and he could be right. Corporate mergers and layoffs tend to go together, although a wedding with Cadbury or Nestle, both European, might not be as traumatic as a sale to a U.S. company.

A few days ago, I questioned whether a Hershey merger, with anybody, would make sense. I still do. The roster of dud deals shows that executives often blend companies for the wrong reasons, and a Hershey buyout should be weighed extremely carefully.

But not by Fisher. It's not his beeswax. The U.S. economy runs on voluntary transactions made by free people whose possessions are relatively shielded from molestation by government, and he's gumming up the works.

I don't mind many of the government incursions that drive property-rights activists up the wall: pollution laws, justifiable eminent domain seizures, federal control of wilderness. And if there's an antitrust issue with a Hershey merger, bring on the Justice Department.

But when a state attorney general hinders a $10 billion deal because of possible layoffs, a line has been crossed, for the wrong reasons. And this guy is the Republican candidate for governor?

Even more voluminous than the academic literature on failed mergers I noted last month are studies showing that when government tries to protect jobs, such as Fisher is doing, it has the opposite effect.

France and Germany proved this brilliantly in recent decades by passing laws making it almost impossible for corporations to dismiss employees. But if companies can't fire anybody, they won't hire anyone, either. Germany added hardly any jobs in the 1990s; its unemployment rate is 10.7 percent.

What does Fisher want to do? Imprison all Pennsylvania's companies inside the state? Put a fence around all the jobs?

Imagine it's next year. Governor Fisher is trying to persuade DaimlerChrysler to build its new car plant, with $700 million in investment and 3,000 jobs, in his state. What are the chances?

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