http://www.latimes.com/business/la-fi-farmer21mar21,1,7211223.story?coll=la%2Dheadlines%2Dbusiness
CALIFORNIA
Chief Executive of Farmer Bros. Hands Reins to Son
Despite the management change, patriarch Roy F. Farmer is expected
to retain a firm grip on the coffee distributor.
By Jerry Hirsch
Times Staff Writer
March 21, 2003
Roy F. Farmer, the patriarch who has guided Farmer Bros. Co. for more
than five decades, handed day-to-day control of the Torrance-based
coffee distributor to his son Roy E. Farmer on Thursday.
In a Securities and Exchange Commission filing, the company said Roy F.
Farmer, 86, will remain chairman of the company his father and uncle
founded 91 years ago and that his son Roy E. Farmer will take over daily
operations as chief executive. The younger Farmer, 50, has spent his
entire career at the firm and until Thursday was president and chief
operating officer.
The management transition comes at a time when the thinly traded public
company is under increasing pressure from institutional investors and
dissident family members to disclose more information about its
investments and operations.
Last week, Atlanta money manager Marc Heilweil of Spectrum Advisory
Services Inc. sent Farmer Bros. a letter demanding more information
about the company's $300-million cash stockpile -- an amount equal to
70% of its assets -- and its investment strategies. Heilweil, who holds
about $1 million in Farmer shares, said he also wants to know more about
Farmer Bros. real estate holdings, coffee business and other assets.
Heilweil said the information would be helpful in determining the value
of the company.
Franklin Mutual Advisors, a mutual fund that owns nearly 10% of Farmer,
and Steven Crowe, a nephew of Roy F. Farmer, would like to see
management buy out shareholders in a transaction that would take the
company private. The Crowe family owns about 23% of Farmer Bros. shares.
Despite Thursday's management change, the elder Farmer will maintain a
firm grip on the company and its board through the roughly 50% of the
shares he owns or controls in family trusts and the employee stock
ownership plan.
His conservative management style, as well as his practice of avoiding
communication with Wall Street analysts and shareholders, has become a
source of contention between the Farmers and the Crowe family and other
stakeholders. Franklin and several large investors were particularly
irked by the company's scheduling of its annual meeting on the day after
Christmas.
They still are irked.
"What I would like to hear from my cousin is what he plans to do
strategically to grow the business," said Steven Crowe, adding that
Farmer Bros.' sales have declined steadily from a high of $240 million
in 1998 to $206 million last year.
In the SEC filing, Roy E. Farmer indicated that the company could be
looking for an acquisition, but said little else about his strategy. "To
be sure," he said, "we have our eyes open for businesses that will
complement our business, when the time is right."
He defended Farmer Bros.' cash holdings as an important asset that
provides the company with flexibility and helps the rapid price changes
that occur in what is largely a commodities business.
Both Farmers declined to be interviewed.
The company also declined to say why the management change was being
made at this time. The elder Farmer has been ill and missed the last
shareholders meeting. He has attended only half of the company's board
of directors meetings over the last two years.
Management of Farmer Bros. has rejected much of the criticism from
outside shareholders, saying they have been well-served by the company's
investment gains.
"Farmer Bros. has raised its dividend 7.5% annually since 1998. Our
stock price has increased since 1980 from $17 to more than $300," the
company said in a statement after receiving Heilweil's letter.
Shares of Farmer Bros. fell 50 cents Thursday to close at $312.50 on
Nasdaq, giving the business a stock market value of $602 million.
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