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http://www.latimes.com/business/la-fi-farmer25dec25,1,1902791.story?coll=la-headlines-business
Farmer Bros. Ends Bitter Feud in Buyout
By Jerry Hirsch
Times Staff Writer
December 25, 2003
A bitter, decades-long battle between two branches of the family that
founded Farmer Bros. Co. ended in a Los Angeles County
Superior Court room Wednesday, when the company agreed to buy out the
interest of the Crowe clan for $111 million.
The settlement leaves the Farmer branch firmly in control of the Torrance
company and gives the Crowe family a fortune that they had been unable to
tap because of a complex family trust.
Over the years, the two sides have bickered over everything from seats on
the board to accusations that 87-year-old company Chairman Roy F. Farmer
withheld trust funds from a critically ill Crowe niece.
Wednesday's settlement also probably alters the outcome of a separate fight
between the company and dissident shareholders, including Franklin
Mutual Advisors, a longtime critic of Roy Farmer and the company's
management. The deal strengthens Farmer's hand by giving him, other
executives and an employee stock ownership plan 58.3% of the company.
The Farmer-led management team intends to use its now-solid majority of the
shares to reincorporate the business in Delaware and take a number of other
actions opposed by Franklin, which owns 9.6% of Farmer's stock. A
shareholder vote is set for Jan. 21.
The company also plans a 10-for-1 stock split to create more of a market for
the thinly traded shares.
Bradley Takahashi, a Franklin vice president, said the mutual fund would
evaluate the settlement after the holidays. The fund maintains that the
company has been managed more for the interests of the Farmer family than
other shareholders.
Superior Court Judge Thomas W. Stoever approved the deal to buy out the
Crowe family just as litigation between the two families over control of
trusts that held stock in the company was about to begin. Under the
agreement, Farmer Bros. will purchase 443,845 shares, or about 22.5% of the
company, from the Crowes for $250 a share.
That price represented a 21% discount from Farmer's $316 closing on Nasdaq
on Wednesday. As the judge was approving the settlement, a snack bar just
steps from the courtroom was handing out free cups of Farmer Bros. coffee
for Christmas.
Gary Lutin, a New York investment banker and critic of the company's
management, said buying the shares at a discount was a smart move by the
board. He also lauded the stock split. The company has been criticized for
not being responsive to shareholders, and splitting the stock is a step
toward making Farmer Bros. shares more affordable for average investors.
"The question is if these are just cosmetic appeasements, or if it is
evidence of a transformation by the board," Lutin said.
Farmers Bros. was founded in 1912 by Roy E. Farmer, the father of Roy F.
Farmer and Catherine Crowe.
Chief Executive Roy E. Farmer, the grandson of the company founder, said in
a statement Wednesday that the company thought it was prudent to drain down
some of its $300 million in cash and securities to purchase such a large
block of shares at a discount.
"This agreement removes a distraction as management explores additional
steps to enhance shareholder value," he said.
Farmer Bros. will retain more than $190 million in cash, which it said it
might use for "potential acquisitions, additional share repurchases and
extraordinary dividends."
Farmer's statement said the company had no plans to take itself private, as
some shareholders have urged, or put the business up for sale "but may
decide to do so in the future."
Farmer Bros. will use about 125,000 shares to help fund its employee stock
ownership plan, a move that will give the plan control over 18.7% of the
company. After the transaction, the Farmer family will hold 39.6% of the
shares, leaving ownership of the remaining public shareholders at 41.7%.
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Copyright 2003 Los Angeles Times
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