Family
Business Magazine E-Newsletter
April
1, 2008
Contents
1.
Seattle Times Co. puts Maine papers up for sale.
2.
Aflac to hold vote on executive compensation.
3.
New York Times Co. to expand board, including two of activists' picks.
4.
Wisconsin engineer sues cousins over sale of company.
5.
Setting a price for retiring seniors' equity.
6.
Preparing for a private equity deal.
1. Seattle Times Co. puts Maine
papers up for sale. The Seattle Times Co., owned by the
Blethen family, is exploring the sale of its Blethen Maine Newspapers
-- the Portland Press Herald/Maine
Sunday Telegram, the Kennebec
Journal, the Morning Sentinel
and MaineToday.com. The Seattle Times Co. bought the newspapers from
Guy Gannett Communications in 1998, the Portland Press Herald reported.
Newspaper analyst John Morton told the Portland Press Herald, "I think we
all know that they're struggling in Seattle.... It just comes down to
where they need the money." The Seattle Times never disclosed what it
paid for the Maine papers; Morton previously estimated the price at
$200 million and believes the Blethens would be lucky to get half that
now, the Portland Press Herald
reported. Seattle Times president and CEO Frank Blethen said the family
felt compelled to buy the Maine papers after learning that Alden
Belthen, Frank's great-grandfather, who bought the Seattle Times in 1896, grew up in
Maine, the Portland Press Herald reported.
Crosscut.com, a Seattle website, noted that the Seattle Times' first-quarter print
revenue is down 10.7% from the first two months of 2007, and its online
revenue for the same period is down 6.5%. According to Crosscut, Frank
Blethen "burst into tears" when he told Portland Press Herald staffers of
his decision to sell the Maine papers. (Source: Portland Press Herald, March 18,
2008; Crosscut.com, March 25, 2008.)
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to the top.
2. Aflac to hold vote on executive
compensation. At its annual meeting in May, Aflac Inc.
will become the first public U.S. company to give investors a
non-binding vote on top officers' compensation, the Wall Street Journal reported.
"Daniel P. Amos, Aflac's longtime chief executive officer, persuaded
fellow directors to embrace the idea after a shareholder last year
submitted a resolution requesting the vote," the Journal article said. Amos, the son
and nephew of Aflac's three founders, "received $3.7 million in salary,
bonus and other compensation and was granted restricted stock and stock
options valued at $9.3 million," the Journal
reported. "Some pay experts criticize Mr. Amos's retirement benefits,
valued at more than $49 million at the end of 2006." Amos told the Journal, "If I leave tomorrow, what
are you going to have to pay to replace me? I don't work based on
monetary reasons. At the same time, I want to be paid for what I am
worth." (Source: Wall Street
Journal, March 7, 2008.)
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to the top.
3. New York Times Co. to expand
board, including two of activists' picks. Arthur
Sulzberger Jr., chairman of the New York Times Co., has agreed to
support two of the four people nominated by its largest outside
shareholder, hedge fund Harbinger Capital, as directors. "The Times
will expand its board from 13 to 15 to accommodate the new nominees,
one of whom is Scott Galloway, a New York University marketing
professor and shareholder activist who has been advising Harbinger,"
the Associated Press reported. The other is James Kohlberg, cofounder
of investment firm Kohlberg & Co. LLC. "Sulzberger's concession is
significant if only because it so rarely happens," Portfolio.com
reported. "Last year, he vigorously fought back (and won) when other
activist shareholders waged a proxy battle. He has remained stubbornly
resistant to change, even when the share price of the New York Times
has been steadily declining." The Portfolio.com analysis noted that
Harbinger and Galloway "chose a more civilized approach to getting
inside the boardroom ... they made no demands for changing the
company's shareholder class structure, which gives the Sulzberger
family more control than common shareholders." Fortune.com opined that
Sulzberger "may have neutralized his hedge fund critics by giving them
board seats." The Fortune.com analysis noted, "The hedge funds can't
complain that he is ignoring them, but they don't have enough votes to
sway the board either." (Sources: Associated Press, March 18,
2008; Portfolio.com, March 17, 2008; Fortune.com, March 18, 2008.)
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4. Wisconsin engineer sues cousins
over sale of company. Nicholas DeMarco, an engineer who
founded a manufacturing company, Analogix Inc., in his basement in 1999
and sold it last year to Varian Inc. for $11 million, "is suing two of
his cousins in federal court, trying to block them from sharing in the
profit," the Business Journal of
Milwaukee reported. At the time that Racine, Wis.-based Analogix
was sold, DeMarco sent his cousins Donald Chomas and Paul Crumley a
total of $44,000 to cover their start-up contributions plus interest,
but Chomas and Crumley "returned the checks, through an attorney, with
a letter demanding $5.5 million," the article said. "The money they'd
provided, according to their lawyer, was an investment, not a loan." In
a suit he filed against the cousins, DeMarco says that the cousins were
not listed as owners on tax returns, financial statements or corporate
documents, the Business Journal
article said. But in their response to the suit and counterclaim,
Chomas and Crumley contend that in 2004, DeMarco invited Crumley to
visit Analogix, "telling him at one point, 'Come and see your
investment. Come and see what you own,'" the report noted. The cousins'
counterclaim "asks a judge to declare the two men equity investors and
award them '50 percent of all past and future proceeds from the sale of
Analogix Inc.,'" the Business Journal
article said. (Source: Business
Journal of Milwaukee, March 7, 2008.)
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5. Setting a price for retiring
seniors' equity. "No business can sustain its market
position, let alone grow, if its capital base is dramatically diluted
each time the mantle of ownership shifts from one generation to the
next," writes family business adviser Glenn R. Ayres in Financial Management of Your Family
Company. "The perception of many senior owners that they must
fully 'harvest' their equity at the time of succession thus poses a
serious threat to the continuity of the family business." Ayres notes
that using fair market value as the benchmark to set the price for Mom
and Dad's stock may lead to unrealistic expectations on the part of the
seniors and leave the company short of the cash it needs to grow,
jeopardizing all family members' stake in the long run. A better way to
set the price, he contends, is to assess the retiring owners' needs and
the company's ability to pay.
For details,
see Financial Management of Your
Family Company. Learn more about the book and see the table of
contents here.
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6. Preparing for a private equity
deal. In the just-published Spring 2008 issue of Family Business Magazine,
investment banker William J. Battison offers some tips on making your
company an investment that commands top dollar in today's private
equity market.
- If you
don't already, have your financial statements audited or at least
reviewed by a CPA firm to make sure they're accurate and comply with
generally accepted accounting principles.
- Tighten
your operating and financial controls so a buyer can be assured that
the tools are in place to drive the company to still higher levels of
prosperity.
- Identify
any areas for potential cost savings. Even if you don't make any cuts
now, a buyer will appreciate knowing where savings can be realized. You
may also want to consider dropping any lines of business that are
unprofitable or are otherwise acting as a drag on your bottom line.
For more
advice, see the Spring 2008 issue of Family
Business Magazine. See the complete table of contents for the
issue here. For subscription
information, see here.
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Coming in Summer 2008: An updated list of
America's oldest family companies. Family Business Magazine's
acclaimed list of America's oldest family companies is among the most
popular features of our website, www.familybusinessmagazine.com. Since our list was last
published in 2003, we've learned of some companies we had inadvertently
overlooked; other firms were closed or acquired and thus have dropped
off the list. Our Summer 2008 issue will feature our newly updated
list. After publication, the complete list, along with extra features,
will be available online. Look for our updated list of the world's
oldest family companies in Autumn 2008.
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