http://www.latimes.com/business/la-fi-farmer25jul25,1,5371633.story?coll=la-headlines-business
CALIFORNIA
Dissidents Seeking Farmer Bros. Seats
By Jerry Hirsch
copy editor/bayer ext.70798
July 25, 2003
Dissident shareholders are poised to make another run at the management of
Farmer Bros. Co. with a plan to change the way the coffee
roaster elects its directors and ultimately to gain seats on the board.
Mitchell Partners, a Costa Mesa-based hedge fund that has a $500,000 stake
in Farmer Bros., is seeking a vote to amend the firm's bylaws to give
shareholders cumulative voting rights.
The proposal, presented to the Torrance-based company and other shareholders
Tuesday, is the latest salvo in a long-running battle between Farmer Bros.'
management and dissatisfied shareholders and estranged members of the family
that founded the commercial coffee company in 1912.
Prying loose some of management's grip is at the heart of a pending lawsuit
brought by Steven Crowe, a nephew of Chairman Roy F. Farmer. Crowe wants to
gain control over trusts that are owned by Crowe family members but are
voted by Roy Farmer. The trusts amount to a 12.5% stake in the company.
Mediation sessions are scheduled for September and if Crowe gains voting
control over the trusts, the dissidents would greatly improve their chances.
Management and the dissidents — Crowe, Mitchell Partners and others — would
each have about a third of shareholders' votes.
Still, management would have the advantage because it would get to vote the
shares of the company's Employee Stock Ownership Plan, which owns about 9%
of Farmer Bros.
With cumulative voting rights, Mitchell Partners and other investors would
receive one vote for each share they own, multiplied by the number of
positions on the board. They could spread their votes among nominees or pool
them behind one candidate.
Such a system would "give minority shareholders the ability to select
representatives on whom they can rely for oversight," said Jim Mitchell, who
runs Mitchell Partners.
The dissident shareholders have been frustrated by the management of
86-year-old Roy Farmer, who has closely guarded control of the company for
50 years. One sore point has been whether the company, which has nearly $300
million in cash, should disclose more information about its business
strategy.
In May, Farmer Bros. reported a dip in fiscal third-quarter net income to
$6.34 million from $6.41 million, the sixth straight period of declines.
Revenue fell 4% to $49.3 million.
Mitchell's shareholder proposal already has the support of Franklin Mutual
Advisors, which owns 9.6% of the coffee company.
Steven Crowe also is behind the effort. His mother, Catherine Crowe, won
election to the board over Roy Farmer's objections through a cumulative
voting campaign in 1981 and served for 20 years. Farmer shareholders,
however, eliminated cumulative voting in 1994.
On Wednesday, a Farmer Bros. spokesman said the company was reviewing the
Mitchell proposal and had no comment.
If the dissidents succeed in restoring cumulative voting, it could be almost
18 months before any of their representatives would join the board.
Farmer Bros. shares, which are thinly traded, closed unchanged at $336.80
Thursday on Nasdaq.
Copyright 2003 Los Angeles Times
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