Coffee roaster enlists the firm's help to explore options, which may
include going private.
By Jerry Hirsch
Times Staff Writer
December 20, 2003
Embattled coffee roaster Farmer Bros. Co. has hired
investment banker Credit Suisse First Boston to explore
"strategic options," according to documents filed in response to a lawsuit
against the Torrance-based company.
Although such a statement can signal that a company is about to put itself
up for sale, the timing and manner of the disclosure left the exact nature
of the investment bank's work for Farmer Bros. unclear.
The company declined to comment on the declaration, which was filed
Wednesday in U.S. District Court in Los Angeles by independent director John
Samore Jr. in response to a shareholders' lawsuit seeking certification as a
class action.
Samore, who was named as a defendant in the suit, said Farmer Bros. had
retained the investment firm in September "to assist the company in
exploring strategic options and the means for improving the company's
performance."
With a market value of more than $600 million, Farmer Bros. is one of the
largest publicly traded food processors based in California.
The company is sitting on a $300-million cash stockpile, which represents
about 70% of its assets.
Although it is cash rich, Farmer Bros.' business has shrunk in recent years,
with earnings and sales steadily eroding in the last two years, and
management is facing shareholder discontent that has taken the form of
lawsuits and other actions.
One shareholder, Jim Mitchell, whose Costa Mesa hedge fund owns about
$460,000 in Farmer Bros. stock, said he doubted that the company would put
itself up for sale. Rather, he said, Farmer Bros. might use CSFB for advice
on how to take the company private.
Mitchell and other shareholders have pushed Farmer Bros. to go private,
contending that the company is run as a family business by Chairman Roy F.
Farmer and his son, Chief Executive Roy E. Farmer, and other managers who
hold voting control over 53% of the stock.
Farmer Bros. met this year with Franklin Mutual Advisors, a longtime critic
of the company, to discuss buying out the mutual fund's 9.6% stake. Nothing
came of the discussions.
Franklin objects to the company's efforts to reincorporate in Delaware and
other provisions that would make it hard for non-family shareholders to push
for changes at Farmer Bros.
However, Samore signaled that the company might be willing to give a bit in
that fight, saying in his court filing that the board was willing to
eliminate a provision in the reincorporation proposal that required an 80%
supermajority of shareholders' votes to change bylaws. Shareholders are
scheduled to vote on reincorporation Jan. 5.
Farmer Bros. also is involved in a dispute, between branches of the family
that founded the business in 1912, over control of a trust that holds 12.5%
of the company's stock.
Samore's filing was in response to a lawsuit filed this month by Leonard
Rosenthal, a shareholder and finance professor at Bentley College in
Waltham, Mass., who alleged that directors and senior executives have used
company funds to lend an Employee Stock Ownership Plan millions of dollars
as a way to increase their control. The ESOP owns about 9% of the company.
Court hearings on both the family dispute and the Rosenthal case are
scheduled for next week.
Farmer Bros. shares fell $5.34 Friday to $312.31 on Nasdaq.
Copyright 2003 Los Angeles Times
The
Forum is open to all Farmer Bros. shareholders, whether institutional or
individual, and to professionals concerned with their investment decisions.
Its purpose is to provide shareholders with access to information and a free
exchange of views on issues relating to their evaluations of alternatives.
As stated in the Forum's
Conditions of Participation, participants are expected to make independent use
of information obtained through the Forum, subject to the privacy rights of
other participants. It is a Forum rule that participants will not be
identified or quoted without their explicit permission.
There is no charge for
participation. Franklin Mutual Advisers, LLC, the manager of funds
owning approximately 12.6% of Farmer Bros. shares, provided initial
sponsorship for the Forum and arranged for it to be chaired by
Gary
Lutin. Continuing support and guidance of the Forum is provided by an
Advisory Panel of actively interested shareholders.
For additional information or to be included in an email
distribution list, send an inquiry to
farm@shareholderforum.com.
