Del Monte Nabs Hershey's CEO
WSJ - May 19th 2011, 07:44
Hershey Co.'s chief executive, David J. West, is departing for a considerably smaller and arguably less glamorous company but one that could provide a bigger payday down the road.
Mr. West will be taking the helm of Del Monte Foods Co., whose products include Contadina tomato paste and Meow Mix cat food as well as its namesake canned fruits and vegetables. The company was bought in March by private-equity firms KKR & Co., Vestar Capital Partners and Centerview Capital LP.
If and when the owners decide to sell the company, Mr. West, who is getting an equity-linked pay package, would stand to benefit.
Potentially higher pay and a close relationship with Del Monte's private-equity owners were likely reasons behind his decision, said Credit Suisse analyst Robert Moskow.
Mr. West also will be leaving behind a company that has endured plenty of internal strife.
"The size of the business doesn't necessarily explain the challenges,'' Mr. West said in an interview. "I am very interested in learning and being challenged by a new food category.'' He said the fact that his daughter attends college in California, where Del Monte is based, also influenced his decision.
Some believe Mr. West, 48 years old, also left because of tense relations with the charitable trust that controls Hershey. Mr. West had opposed the idea of Hershey taking on debt to enter a bidding contest for Cadbury PLC, even though the trust was encouraging it. Kraft Foods Inc. ended up buying Cadbury for $19.5 billion.
There were other issues as well. Mr. West's appointment in 2007—in the wake of his predecessor's run-in with the trust—had caught the trust off guard. Disappointed in Hershey's performance at the time, the trust installed eight of its own picks for directors.
Mr. West, who will take over as Del Monte CEO Aug. 15, declined to comment on relations with Jim Nevels, a Trust official and Hershey chairman.
Centerview founding partner James Kilts, who was vice chairman of Procter & Gamble Co.'s board, has been a mentor to Mr. West. Mr. West previously worked at Nabisco, where Mr. Kilts was chief executive. Mr. West also has worked with Centerview in past deals.
Still, it was a difficult decision for Mr. West to leave Hershey, especially considering his success in cutting costs and consolidating operations, which has boosted Hershey's stock, this person added. Mr. West wanted a new challenge and his close relationship with Centerview helped him decide to make the move, this person said.
Del Monte started wooing Mr. West about midway through its search for a new CEO, which began last December. Directors at Del Monte liked Hershey's success launching new products, like Reese's Minis, and hope Mr. West will duplicate that by finding fresh uses and marketing approaches for Del Monte's fruit and vegetable brands, according to a person close to Del Monte's board.
Del Monte's board is giving Mr. West "a very equity-linked pay package,'' and details will be disclosed soon, another person close to the directors said.
Mr. West declined to discuss his pay.The chocolate producer is about 50% bigger than Del Monte. Hershey had revenue of $5.83 billion in 2010. For the first quarter of 2011, Hershey reported an 8.6% increase in profit. Del Monte's revenue in the year ended May 2, 2010, totaled about $3.74 billion.
Deutsche Bank analyst Eric Katzman and others said there's a risk that Mr. West's exit could prompt departures by other Hershey managers, as many regard him highly. "I've literally run into salespeople at Hershey who have said they'd take a bullet for Dave West, they think so highly of him," Mr. Katzman said.
The Hershey, Pa., chocolate maker named John P. Bilbrey as interim CEO and said it hoped to fill the post permanently soon. LeRoy Zimmerman, chairman of the trust board of directors, 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."
Mr. Bilbrey, 54, who in November was promoted to executive vice president and chief operating officer, is considered a likely permanent replacement for Mr. West.
Mr. Bilbrey recently began exploring CEO opportunities elsewhere after deciding being older than Mr. West meant he had "no place to go at Hershey,'' an uninvolved food-industry recruiter said.
Del Monte used Heidrick & Struggles International Inc. for the CEO assignment, people familiar with the matter said.
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