The new year is starting
with what seems to be good progress in the definition of strategic
alternatives, as summarized below:
Prospective strategic
relationships:
We are now engaged in exclusive explorations with one of the parties
selected by the Chapman Group, the food industry investment banking firm engaged to advise shareholder
interests. This prospective strategic relationship appears to be
ideally suited to develop the full value of Farmer Bros. coffee
operations, in terms of both geographic and customer market fits, and also
-- perhaps most importantly -- based on the record of their management for
profitable growth and enlightened employee relationships. As explained in
my November 18, 2005 Forum Report, it is
a matter of practical logic that whatever party can derive the most value
from the business resources of Farmer Bros. -- including facilities,
commercial relationships and employees -- should be the one that can
ultimately deliver the most value to shareholders.
During the next month we
will be working on the definition of terms for a transaction that can be
proposed to all Farmer Bros. shareholders. Among other things, we hope to
establish provisions that will allow existing Farmer Bros. shareholders an
opportunity to consider some form of investment participation in the
future of the combined coffee business under its new management.
The surplus funds of Farmer Bros., including whatever is left of the
exisiting funds plus the proceeds from a sale-leaseback refinancing of
real estate, are of course expected to be distributed in cash or by some
other means made fully "realizable" to shareholders. If you have any
suggestions of conditions that should be addressed to make the proposal
attractive, please let me know your views.
Information
requirements:
The management of Farmer Bros. has continued their expected ritual
of delay in response to the demand
for records submitted on December 9, 2005. The latest exchange,
involving confidentiality provisions, has been posted on the Forum web
site for anyone interested in the details:
Management Attorney's Response to
Shareholder Delegate's Demand for Records
(December 27, 2005 -
January 13, 2006)
It should be noted that
the company has actually acknowledged its obligation to provide the
demanded real estate records, so we may assume that management will not
waste much more of the shareholders' money in efforts to delay the
eventual delivery of information.