Unhappy shareholders of Farmer Brothers Co. have taken a
first step in an effort to pressure management of the secretive, family-run
company to take some shareholder-friendly actions.
Franklin Mutual Advisers LLC, Farmer Brothers’ largest institutional
shareholder, said in a regulatory filing last week that it would sponsor a
shareholders’ forum to seek ways to raise the price of the Torrance-based
coffee distributor’s stock.
“We don’t think that the value of the company is reflected in its market
price,” said Bradley Takahashi, assistant vice president at Franklin Mutual, a
subsidiary of Franklin Resources Inc. Franklin Mutual owns 9.7 percent of
Farmer Brothers’ stock.
The action confirms a recent Business Journal report in which investors in
Farmers said they were looking for ways to force Chairman and Chief Executive
Roy F. Farmer into moves that will maximize the stock price.
Investors have complained that farmer is intentionally keeping the price down
for estate-planning purposes.
A secretary for Farmer hung up the phone when a reporter called seeking
comment.
A shareholders’ forum isn’t necessarily a hostile event. Technically, it’s a
way for shareholders to exchange views with management. However, it’s been
used in the past by investors who are dissatisfied with companies’ management
as a way to induce change.
Franklin, which failed in a past attempt to unseat the Farmer Brothers’ board,
expressed concern about the company’s steadily accumulating pool of cash and
securities, which totaled $279 million as of Dec. 31.
“Management has failed to articulate any coherent strategy behind its move… to
build up its cash and investments to such proportions,” the company said in
the Securities and Exchange Commission filing. “(Franklin) has communicated
its concerns over the years to (Farmer Brothers) without avail.”
Two years ago, Franklin opposed the re-election of Farmer Brothers’ board.
Investment banker Gary Lutin, who will chair the forum, has estimated the
value of Farmer Brothers’ stock at $400 per share. As of April 18, the stock
was trading at $325.
Lutin has suggested several alternative strategies that could be used to help
Farmer Brothers realize its full value. No date has been set for the forum.
“Mr. Farmer has done a great job building a coffee business. It’s my
assumption that he’ll want to be equally effective in addressing shareholder
interests,” Lutin said.
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.
