Mkt Sees
Big Changes At Farmer Bros After CEO Death
By JOHN SEWARD
January 11, 2005 4:25 p.m.
Of DOW JONES NEWSWIRES
NEW YORK -- The death Friday of Roy E. Farmer, Farmer
Bros. (FARM) chairman, chief executive and president, could hasten the
company's sale or restructuring after years of infighting with dissident
shareholders, as reflected in the stock's more than 20% runup over the
past two sessions.
The Torrance, Calif., coffee supplier has about 70% of
its assets held in cash, and disgruntled shareholders have long been
vocal in criticizing the company, which is 40% owned by a trust that had
been headed by Roy Farmer up to his death. Another 20% stake is owned by
the company's employee stock ownership plan.
Shares of the thinly traded company rose more than 10%
Monday and gained another 10.5% Tuesday, ending Tuesday's regular
session at $27.49 on volume of 318,600 shares, compared with average
daily volume of 15,500.
The stock has risen more than 24% since setting a
52-week low of $22.05 Thursday.
"The market reaction suggests a broad appreciation of
the company's value under these circumstances," said Gary Lutin, an
investment banker who has joined with critics of the company.
Lutin said dissidents are "in the process of selecting
potential strategic options" they expect to present to shareholders.
"We're already progressing down that path, and this
doesn't change the course," Lutin said.
Roy E. Farmer, a lifelong employee of the company, was
elevated to chief executive in March after his father, Roy Farmer, died
of cancer at 87. The company was founded in 1912 by Roy E. Farmer's
grandfather.
A Huntington Beach, Calif., police representative
confirmed reports that the 52-year-old Farmer appears to have died from
a self-inflicted gunshot wound in Huntington Beach.
The company on Sunday named 67-year-old Guenther W.
Berger interim chairman. Berger, a 44-year veteran of Farmer Bros., also
serves as vice president of production.
In the past, 9% stakeholder Franklin Mutual Advisers
has been among vocal dissidents supporting the sale of the company.
A Franklin vice president, Bradley Takahashi, declined
Tuesday to comment on the company's outlook.
"It's distressing news," Takahashi said of Roy Farmer's
death. "It's probably just a little too early to comment."
Gregory E. Bylinsky, managing director of Lime Capital,
which owns an undisclosed number of Farmer Bros. shares, said Farmers'
recent share price indicates the market "is expecting a sale, some kind
of buyout."
"Roy the father and Roy the son leave a pretty
significant void in the leadership," Bylinsky said. "This may be a
chance for a strategic buyer to come in."
-By John Seward, Dow Jones Newswires; 201-938-5400
