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Forum Report: Progress with Exploration of Strategic Alternatives

(December 12, 2005)

 

Sent: Monday, December 12, 2005 9:43 AM
Subject: Progress with exploration of strategic alternatives

 

Following is a summary of recent Forum progress relating to the development of strategic alternatives for Farmer Bros. shareholders:

 

Prospective strategic relationships: We have been proceeding with the explorations of parties selected by the Chapman Group, the food industry investment banking firm engaged to advise shareholder interests, to determine their potential interests in acquiring or otherwise assuming responsibility for management of the Farmer Bros. business operations. As indicated in my November 18, 2005 Forum Report, we intend to choose one of these parties to work with exclusively in the development of a proposal for a transaction, based on who can most effectively manage the company's coffee business to generate value for shareholders and career benefits for employees. Current discussions suggest that we will be able to make that choice before the end of this month.

 

As also indicated in my November 18 Report, we are deferring explorations of interests relating to the company's real estate assets until we define strategic objectives for the business operations. However, as reported below, we have initiated a demand for information that we know shareholders will need to determine the value of the real estate.

 

Information requirements:  As previously reported, the company's current management has rejected my October 28 request for cooperative responses to investor information requirements, insisting that we follow the burdensome processes of formal demands under state laws that compel management's provision of records. The required formal demand was therefore presented this past Friday afternoon to obtain information shareholders will need to evaluate the company's real estate assets. A copy of the shareholder Delegate's demand letter has been posted on the Forum web site:

 

Demand for Information about Company's Real Estate Assets

http://www.shareholderforum.com/farm/Process/20051209_letter-Delegate.htm

 

Investment Company status:  The recently reported court decision in the SEC's case against National Presto may be expected to support SEC action to enforce compliance with the Investment Company Act of 1940 in the similar Farmer Bros. situation, as suggested in a January 8, 2004 Forum letter. This could require separating management control of the company's coffee business operations from control of the company's $170 surplus funds, possibly through a spinoff or cash distribution. Speculation about this prospect may have contributed to last week's 10% increase in the company's stock price.

 

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Your questions and comments on these or any other matters concerning your investment in Farmer Bros. will be welcomed.

 
           GL
 

Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212-605-0335
Fax: 212-605-0325
Email: gl@shareholderforum.com

 

 

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.