The top executive of the Hershey Co. chocolate giant, David West, 47, resigned to take a position at the smaller Del Monte Foods, the marketer of fruits, vegetables and pet goodies, saying it was time for a new challenge.
West's departure comes as the Hershey stock price has been soaring but also while the charity that controls the iconic chocolate company is under being investigated by the Pennsylvania Office of Attorney General.
Hershey Co. appointed chief operating officer John P. Bilbrey as interim president and chief executive officer. "We will work quickly to name a permanent chief executive officer to ensure the continuation of this orderly transition," said James E. Nevels, Hershey board chairman.
Though Nevels said Hershey would maintain its long-term financial targets, shares in the Hershey Co. fell sharply as the market rose on Wednesday. Hershey shares shed almost 3 percent of their value, or $1.65, and closed at $55.43.
"We are surprised and unsettled to see Mr. West leave, given his enormous success in transforming a shrinking company into one of the best growth stories in food," Jonathan Feeney, with Janney Capital Markets in Philadelphia, said in a report. But he retained his buy rating on Hershey stock and said, "We are confident that Hershey's current virtual cycle of investment and superior returns can be sustained for shareholders."
West was not available for comment, company spokesman Kirk Saville said.
But West said in a statement, "After 10 years with the company, it's time to take on the next challenge."
Del Monte Foods, with annual sales of almost $4 billion, compared with Hershey Co.'s $5.7 billion in annual sales, was recently taken private by an investor group affiliated with Kohlberg Kravis Roberts & Co. L.P.
West earned $10.5 million in compensation in 2010, according to Hershey's regulatory filing with the Securities and Exchange Commission. Bilbrey was compensated with $4.2 million as COO.
The Hershey Co., with more than 40 percent of the U.S. chocolate market, is controlled by a charity established in 1909 by Milton and Catherine Hershey to finance and operate the Hershey School for disadvantaged children.
The charity is endowed with $7 billion to $8 billion in assets, or the legacy of the Hershey estate. Hershey Co. is the single largest asset owned by the charity, and its cash dividends finance the operations of the acclaimed 1,800-student school.
The Attorney General's Office disclosed last year that it was investigating the charity after a series of articles in The Inquirer. One of those articles reported that West's predecessor, Richard Lenny, was an investor in the Wren Dale Golf Club, north of Hershey. The charity bought the club with school funds in 2006 for $12 million - a price two to three times the value determined by the charity's independent appraisal.
The charity said it needed the golf course for future expansion and for "buffer land" for student safety. The Wren Dale deal is part of the AG investigation.
West assumed the top job at the Hershey Co. after Lenny departed in a board reorganization unrelated to the golf course deal. As chief executive, West transferred chocolate production to a new plant in Mexico and discussed a merger between Hershey and British giant Cadbury. Kraft Foods Inc. beat out Hershey for Cadbury in early 2010.
According to published reports, West wasn't enthusiastic about a possible merger between Hershey and Cadbury, and his reluctance caused tension between him and the charity's controlling board. There has been no evidence of tension in recent months.
The Hershey Co. recently disclosed in a corporate filing that it was negotiating to sell its old chocolate factory in downtown Hershey to the charity for an undisclosed amount.
In a statement, LeRoy Zimmerman, the head of the charity that controls the chocolate company, said: "We thank David West for his leadership during a period of growth for the Hershey Company and express our confidence in J.P. Bilbrey, who was also essential to that growth."