The Shareholder Forum

supporting investor interests in the use of their capital to produce goods and services


Purpose & History of Services

The Shareholder Forum

The Shareholder Forum supports investor interests in corporate enterprise value with services that require independence – and that may benefit from the Forum’s network resources and recognition for advocacy of long term investor interests – to assure a definition of relevant issues and fair access to information that can be relied upon by both corporate and investor decision-makers.

The policies that provide a foundation for the Forum’s marketplace functions have been carefully developed and tested to allow any investor to participate in its communications, either anonymously or visibly, without acting in concert. Established originally to accommodate professional fund managers, this independent moderator function has proved to be consistently effective in managing orderly processes of issue definition for rational analysis by fiduciaries who are responsible for informed decisions.

Initiated in 1999 by the CFA Society of New York (at the time known as the New York Society of Security Analysts) with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of its members, and independently supported by Mr. Lutin since 2001, Forum programs have achieved wide recognition for their effective definition of important issues and orderly exchange of the information and views needed to resolve them. The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

Currently important applications of the Forum’s independent position include the support of corporate managers who wish to provide the leadership expected of them by responding to activist challenges with orderly reviews of issues relevant to long term investor interests.

Requests for Shareholder Forum consideration of support may be initiated confidentially by any investor or by the subject company, or by the professional advisors to either.  


 Investment Dealers Digest


Fairness Opinions

A fairness opinion letter that Morgan Keegan issued in support for Warren Buffett's March bid for Clayton Homes Inc. has raised criticism that such letters are of little value. In fact, some even say that they are one of the last bastions of easy money to be made on Wall Street.

The letter, which Clayton Homes requested, was provided in March to the board of the maker of manufactured houses. It said that the $12.50 per share offered by the oracle from Omaha in late March, a 12% premium at the time, was a fair one. Morgan Keegan, an investment bank based in Memphis and owned by Regions Financial Corp., presented its letter on March 21 and a merger agreement was dated April 1.

But now, as shares of Clayton Homes trade above the offer price at close to $13 and other potential bidders are considering a higher bid, some say the letter is out of date. At any rate, it hardly appears to in the best interest of shareholders, who could be getting more than the acquisition price by simply trading Clayton's stock. Still, the Clayton board has used the letter as a justification for the Buffett deal long after the company's share price exceeded the bid price, said bankers.

"No professional investor pays any attention to a fairness opinion," said Gary Lutin, an investment banker who advises shareholders. "Their only real use is by lawyers as evidence that a board of directors has performed some kind of ritual that courts recognize as satisfying fiduciary duties."

Moreover, a valuation analysis of Clayton Homes, performed by Glass, Lewis & Co. LLC, a research firm that provides advice on issues of corporate integrity and proxies, concluded that the $12.50 offer was too low and recommended that shareholders reject it. The report said Clayton could fetch as much as $16 per share.

"We took a fresh look at the fairness of the deal in light of changed market conditions," said Gregory Taxin, chief executive of Glass Lewis, "We also evaluated Morgan Keegan's process and fairness letter and we concluded that there were some things about their analysis that we took issue with."

Taxin said that the opinion was rendered during the Iraq war, when the markets were depressed. After the war, stock prices of Clayton's peer group rose 40%, and Clayton's stock rose only to above $13, held back by the $12.50 cash bid, bankers said. The letter given on March 21 to Clayton's board provided "substantial value to the board at the time, but the world has since moved and changed," Taxin said.

Despite the run-up in prices and the objection to the bid by some institutional shareholders, Clayton's board stood by the deal, which had a no solicitation clause forbidding Clayton from seeking other bids. And last week, under pressure from another potential bidder, Clayton's board opened the bidding for a two-week period. In return for allowing the two-week window, Clayton Homes will pay Buffett's Berkshire Hathaway $5 million. Cerberus Capital Management is expected to make a bid.

Nevertheless, bankers point out that fairness letter have served as a convenient insurance policy that shows the board tried to get a fair price for the company. They also say that these pricey letters-which cost as much as $1 million or more-are one of the best kept secrets for making easy money among investment banks. "They are not worth the paper they are written on," said one banker.

Morgan Keegan, which charged just $250,000 for its letter, declined to comment. A spokeswoman said the bank "does not comment on our clients' business."


Copyright 2003 Thomson Media Inc. All Rights Reserved.




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Publicly open programs of the Shareholder Forum are conducted for free participation of all shareholders of a subject company and any fiduciaries or professionals concerned with their decisions, according to the Forum’s stated "Conditions of Participation." In all cases, each participant is expected to make independent use of information obtained through the Forum, and participation is considered private unless the party specifically authorizes identification.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.