Family Business Magazine E-Newsletter
May 6, 2008





Contents
1.  Samsung chairman, under indictment, announces resignation.
2.  Mars to acquire Wrigley with financing from Buffett.
3.  With Reuters acquisition, Thomson raises its profile.
4.  France's Halley family to relinquish control of Carrefour.
5.  Sulzberger: New York Times Co. is not for sale.
6.  Family disputes are exacerbated in tough economic times.
7.  Strategic planning for the family enterprise.



1.  Samsung chairman, under indictment, announces resignation.  After being indicted on tax evasion charges, Samsung Group chairman Lee Kun-hee said he would resign from his position at the company after 20 years at the helm. His son and presumed successor, Lee Jae-yong, also resigned. "It remains unclear who will succeed him," the New York Times reported. "No Korean family has managed to cling to a vast corporate empire as artfully as the Lees" amid efforts to reform practices of the country's chaebols, or family-run conglomerates, Business Week noted in a profile of Lee published before the indictment and resignation, adding that Lee "seems to have been ... obsessed with family control." A controversial and secretive Samsung unit called the Strategic Planning Office (SPO) "wielded enormous power and was often accused of protecting the Lee family's interest at the cost of Samsung shareholders," the Times article said. Along with Lee's resignation, Samsung also announced plans to abolish the SPO. Thae Khwarg, CEO of fund manager SEI Asset Korea, told Time magazine that Samsung is "moving to the separation of ownership and management."  (Sources: New York Times, April 23, 2008; Time, April 22, 2008; Business Week, April 28, 2008.)

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2.  Mars to acquire Wrigley with financing from Buffett.  Wm. Wrigley Jr. Co. has agreed to be acquired for $23 billion by another large family-owned candy company, Mars Inc. Warren Buffett's Berkshire Hathaway Inc. would provide financing and receive a stake in the combined company. "If the Mars deal is completed, the Wrigley company will become a stand-alone entity within Mars, retaining its name" and its Chicago headquarters, according to the Wall Street Journal. Citing Mars' tight family control, Portfolio.com noted that "The buyout team matches the world's most famous, most media-savvy investor with perhaps the world's most secretive consumer company." The Journal reported that "Like many families that own businesses for generations, the Wrigley family, which controls at least two-thirds of Wrigley's supervoting B shares, had become less engaged in the company." Executive chairman Bill Wrigley Jr., the only member of the family in the business, "said he didn't have much discussion with relatives during the negotiations," the Journal article said. Wrigley declined to comment on how the deal might affect Wrigley Field, home of the Chicago Cubs, but said that "the Wrigley family loves the fact that the name's on the field," the Journal reported.  (Sources: Wall Street Journal, April 29, 2008; Portfolio.com, April 28, 2008.)

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3.  With Reuters acquisition, Thomson raises its profile.  The traditionally low-key Thomson Corporation's official completion of its takeover of Reuters was announced with a high-profile marketing campaign to herald the merged company's new name, Thomson Reuters, the New York Times reported. Gustav Carlson, Thomson Reuters' chief marketing officer, told the Times that the Thomson family did not insist that the combined company carry their name. "[T]he Thomson family had been unsentimental about its history when it has come to reorganizing the company," the Times noted. The company, which once owned The Times of London, the Globe and Mail in Toronto and other newspapers, has sold off those holdings to concentrate on digital publishing and has also "pulled out of department stores, North Sea oil, broadcasting and the travel business," the article said.  (Source: New York Times, April 17, 2008.)

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4.  France's Halley family to relinquish control of Carrefour.  The Halley family of France, whose stake in Carrefour SA had been split among three family branches, is dissolving their voting bloc on the company's board, the Wall Street Journal reported. The family had controlled 20% of the voting rights and 13% of the shares; their stake was valued at $6.81 billion, according to the Journal. The decision to relinquish their controlling interest "will permit the Halleys, who have squabbled over strategy and money for years, to sell their shares whenever and however they see fit," the article said. "Two family representatives will also step down from the Carrefour board, leaving Chairman Robert Halley as the only family member in a position of power until his term expires next year." The Journal added that the decision of founder Paul-Louis Halley, who retired at the end of the 1990s and died in a plane crash in 2003, to turn over management to an outsider rather than name a family successor "is at the root of the family's divisions today." The non-family executive, Luc Vandevelde, who had been chairman until his March 2007 resignation, had proposed a leveraged buyout, but the family rejected the plan, the report noted. Robert Halley took over as chairman from Vandevelde, but the rifts in the family persisted, the Journal reported.  (Source: Wall Street Journal, April 15, 2008.)

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5.  Sulzberger: New York Times Co. is not for sale.  Reacting to reports in Newsweek and the New York Post that New York Mayor Michael Bloomberg might be considering buying the New York Times Co., company chairman Arthur Sulzberger Jr. said at the Times Co. annual meeting that "This company is not for sale. This company will continue to have the ownership it enjoys today," the New York Times reported. Separately, Bloomberg also denied the rumors at a press conference, saying, "I am not going to go into the newspaper business," according to a Reuters report. Also at the Times Co.'s annual meeting, Scott Galloway and James A. Kohlberg, two investors who were part of a group that had threatened a proxy battle, were elected as directors. Meanwhile, Reuters reported that Moody's Investors Service "cut its ratings on the New York Times Co. to the lowest investment grade, citing declining cash flows due to falling revenues from newspaper advertising."  (Sources: New York Times, April 23, 2008; Reuters, April 22, 2008.)

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6.  Family disputes are exacerbated in tough economic times.  "Family business conflict is heightened during times of economic challenge and transition," write advisers Gary Brooks and Lynn D. Diamond in The Family Business Conflict Resolution Handbook. "In too many cases, love and affection among family members, including those not employed in the business, are directly proportional to the checkbook balance. When cash has been dissipated, the animosities and prejudices among members of the family seem to rise to the surface. The business becomes the new and larger stage on which to act out these feelings." The authors note that a family council facilitated by an independent adviser can help families deal with issues of risk management, preparation for succession and defining and meeting stakeholder obligations. "The family system, thriving on love, loyalty and security, must often be violated as the enterprise undergoes the transitions needed to build a stable platform for the future," they write. "A third party can assist by creating urgency, decisiveness and focus in the process of redirecting the family and stabilizing the enterprise."



For Brooks and Diamond's list of six missteps to avoid in volatile times, see The Family Business Conflict Resolution Handbook. Learn more about the book and see the table of contents here.

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7.  Strategic planning for the family enterprise.  "A strategic plan defines what the enterprise and the family must do to succeed in building the strongest possible market and financial position and meet the company's human and financial resource requirements," write advisers Peter von Braun and Richard Narva in the current issue of Family Business Magazine. "This effort is critical because the business must be successful in order for the family to attain its own goals." They offer the following tips:


For von Braun and Narva's advice on family business continuity planning, see their article entitled "Two plans for the family-controlled enterprise" in the Spring 2008 issue of Family Business. Visit our website for subscription information.

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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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