The initial result of Hershey Co. (NYSE:HSY) CEO David West's surprising departure was a dip in share price for the giant Pennsylvanian chocolate maker -- almost 4% at one point. After all, West commands great loyalty at the company and was credited for leading it out of the doldrums to three straight years of financial success after he was promoted to CEO in 2007.
But the move doesn't doom the maker of Kisses for the long term. Hershey recently reaffirmed its outlook for the year, saying net sales and adjusted earnings will be around 3% to 5%, with long-term targets at 6% to 8%. MarketWatch cites Citigroup Inc. analyst David Driscoll saying, "We continue to see good things in store for Hershey."
From one overbearing boss to another?
Bloomberg News suggests West's departure was related to a dispute with the trust that has controlled Hershey for the past 93 years. The trust tried to push a patient West to make a counterbid after Kraft Foods Inc. offered to acquire Cadbury plc. Hershey weighed a $17 billion offer for Cadbury, but Kraft ended up acquiring it for $18.9 billion. The quarrel may have left a bad taste in West's mouth. However, West is now joining a company with private equity executives in the ranks, Del Monte Foods Co. In March, Del Monte and an investor group led by funds affiliated with Kohlberg Kravis Roberts & Co. LP, Vestar Capital Partners and Centerview Partners acquired Del Monte for $5.3 billion. Del Monte is much smaller than Hershey, but the 10-year Hershey veteran will have to contend with a range of new products, including tomato paste and pet food such as Snausages and Meow Mix.
Who's in, who's out
Hershey's interim choice for CEO is a logical one: executive vice president and chief operating officer John P. Bilbrey. He worked with West to turn around the company, which investors blamed for relying too much on North American sales. As COO, Bilbrey was responsible for day-to-day global operations and commercial activities, leading the supply chain as well as geographic regions, including the U.S., the Americas and Asia. From December 2007 to November, he was SVP and president, Hershey North America. Bilbrey joined Hershey in 2003 and, earlier, spent 23 years at Procter & Gamble Co. Hershey will look for a permanent CEO, but it's not a long shot that Bilbrey would take over full time.
At Del Monte, West replaces interim-CEO Neil Harrison who will remain on the board. Harrison took the role after the leveraged buyout. "We're thrilled that an executive of Dave's caliber will be leading Del Monte in the next phase of its development and growth," said Del Monte board members Simon Brown (KKR), Brian Ratzan (Vestar) and David Hooper (Centerview).
"Thrilled," yes, lest they clash on strategy. - Baz Hiralal