The School Hershey Built

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HERSHEY, Pa.—The charitable trust that controls Hershey Co. nurtures some 1,800 disadvantaged children from preschool through high school and beyond here in Pennsylvania.

But amid rising costs to fulfill its mission, the trust is also taking on an unlikely role in a major international takeover battle: Though it could involve shouldering $10 billion more in debt, the trust's board has pushed Hershey to consider outbidding Kraft Foods Inc.'s $16.5 billion offer for British rival Cadbury PLC despite initial resistance from Hershey management, people familiar with the matter say...

... LeRoy Zimmerman, chairman of the Milton Hershey School & School Trust and a company director, declined to comment on a possible Hershey bid for Cadbury. But he did say that ensuring that the boarding school can survive and accept more students has driven the board to focus aggressively on increasing the trust's income. The trust, which controls about 30% of Hershey's stock outstanding and 80% of the voting rights, is "as demanding about [our assets'] performance as anyone on Wall Street," he said. "We just have a long-term perspective."

Chocolate baron Milton Hershey founded the school 100 years ago for orphan boys, declaring that it should operate forever. Initially, a handful of students lived and studied in the house where Mr. Hershey was born. According to the original deed of trust, they were to learn math, science, agriculture, gardening and trades that would enable them to earn a living.

The school expanded quickly, and Mr. Hershey converted nearby barns and farmhouses into classrooms, woodworking s+hops and dormitories. In 1918, he stashed about $60 million of the chocolate company's stock in a trust to benefit the school. By 1937, more than 1,000 students were attending, according to "Milton Hershey School," a book by James D. McMahon Jr.

"It was pretty much a chore-centered life that we lived, along with school," says J. Bruce McKinney, 72 years old, who enrolled in 1948 when he was 11.

By the fall of 1968, the school had expanded to nearly 1,600 students and was including nonwhite boys. In the next decade, girls and children from low-income households who didn't get adequate care at home were also admitted...

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