Deal Worth About $375 Million : Hershey Will Sell Friendly Restaurant Chain
Hershey Foods Corp. said Monday that it would sell its restaurant chain, Friendly Ice Cream Co., to Tennessee Restaurant Co. for about $375 million, underscoring the candy maker’s resolve to concentrate on its basic business of snack treats.
Analysts said that shedding Friendly would probably help Hershey’s future earnings. “Most people thought Friendly depressed growth a bit,” said Ronald Morrow with Smith Barney, Harris Upham & Co.
The Wilbraham, Mass.-based Friendly chain has 850 family-style restaurants mostly in New England, with others in the Midwest and the South.
The sale comes only a few weeks after Hershey announced its purchase of the U.S. candy operations of Britain’s Cadbury-Schweppes PLC for $300 million. That will add to its stable such favorites as York Peppermint Patty, Cadbury chocolate bars, Peter Paul Almond Joy and Creme Eggs.
Strategic Plan
Hershey makes a number of popular candies, including Kit Kat, Mr. Goodbar, Reese’s peanut butter cups and various Hershey’s chocolate bars.
“Although Friendly has been a significant part of Hershey Foods, our decision to sell Friendly is based upon our continuing review of our strategic plan and evaluation of our business portfolio,” said Richard Zimmerman, Hershey chairman.
“Given our desired primary focus as a consumer food products company, we felt our resources could be better deployed if redirected from the restaurant business,” he said.
Analysts said although Friendly was profitable, earnings had declined in the past several years.
The sale will give Hershey an after-tax gain, which a company spokesman said would be significant. Analysts said the proceeds from the sale will also help defray costs associated with the Cadbury-Schweppes purchase.
“This will provide funds for the Cadbury operation,” said Barry Ziegler, analyst at Tucker, Anthony & R. L. Day Inc.
Bought Perkins in 1985
The principal stockholders of Chicago-based Tennessee Restaurants are Donald Smith and Holiday Inns Inc., a subsidiary of Holiday Corp., the restaurant and hotel operator, and Investment Ltd. partnership.
TRC was formed as a holding company and its first acquisition was in 1985 when it bought Perkins Family restaurants, which owns and franchises more than 330 family restaurants, primarily in Ohio, Pennsylvania, New York and Florida.
The Perkins and Friendly restaurants will be operated separately.
Smith brings with him a solid background in the fast-food business. He is a former executive of McDonald’s Corp. and was president and chief executive of Pillsbury Co.’s Burger King and a senior vice president of Pepsico Inc.’s restaurant division.
“Friendly is profitable and Tennessee Restaurants thinks it has an excellent opportunity for growth,” TRC spokeswoman Donna Guido said.
Hershey bought the Friendly chain in 1979 when it embarked on a diversification program, company spokesman Carl Andrews said.
