Family Business Magazine E-Newsletter
July 1, 2008



Contents
1.  Hearst CEO quits unexpectedly, citing differences with family trust.
2.  Ambani brothers feud over Anil's proposed deal with MTN Group.
3.  Levi Strauss considering moving from San Francisco.
4.  Loews exits tobacco business.
5.  Kerkorian again increases his stake in Ford.
6.  Anheuser-Busch rejects InBev's bid.
7.  Fostering shareholder harmony.
8.  Protect your business from economic woes.



1.  Hearst CEO quits unexpectedly, citing differences with family trust.  Victor F. Ganzi, president and CEO of Hearst Corp., has resigned. Hearst's statement announcing the resignation cited "irreconcilable policy differences with the Board of Trustees about the future direction of the company." Hearst publishes magazines, including Redbook and Good Housekeeping, and 15 newspapers, including the Seattle Post-Intelligencer and Houston Chronicle. It is also majority owner of Hearst-Argyle Television Inc., owns stakes in ESPN and debt-ratings service Fitch Ratings, and is an investor in MediaNews Group Inc. Ganzi will be replaced by his predecessor, Frank A. Bennack Jr., vice chairman of Hearst's board. The New York Times noted the absence of "public signs of trouble" and said Ganzi's ouster surprised executives at Hearst and its major joint venture partners. The Times pointed out that the company statement cited a disagreement with the family trust's board of trustees, not with the company's board of directors. The trust was created by the late William Randolph Hearst "to give his heirs ownership of the company, but limit their say in its operation," the Times article said. "Some family members have raised the possibility of a legal challenge to the trust, which will not dissolve -- and give the Hearst heirs direct control of the company -- until the death of the last Hearst heir who was living in 1951," the year William Randolph Hearst died, the Times reported.  (Sources: New York Times, June 19, 2008; Wall Street Journal, June 19, 2008.)

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2.  Ambani brothers feud over Anil's proposed deal with MTN Group.  Talks between Anil Ambani's Reliance Communications abut a possible takeover by South Africa's MTN Group were jeopardized in mid-June when Reliance Industries, controlled by Anil's older brother, Mukesh, threatened to block the deal by claiming a right of first refusal over Reliance Communications. "All the Reliance companies were part of the same empire until the brothers split in 2005," the Wall Street Journal noted. The Financial Times reported that Mukesh threatened to sue MTN and Reliance Communications for damages if the deal goes forward; Anil's group responded by announcing its intention to defend such a suit and "claim costs and damages from Reliance Industries," the Financial Times article said. "The brothers have been bitter rivals since the death of their father, Indian industrialist Dhirubhai Ambani, in 2002," the FT report said. "Anil Ambani is seeking to engineer a de facto reverse takeover between Reliance Communications and MTN, under which he will swap most of his 66 per cent stake in the Indian company for a 34.9 per cent stake in the combined entity. The deal had seemed to be progressing smoothly, with an agreement expected in early July." The Journal noted, "Prolonged uncertainty over the agreement's validity increases the risk that MTN will shy away from the deal altogether." The Journal reported in a subsequent article that, according to a source, "MTN thought until recently that the brothers would find common ground without legal proceedings." (Sources: Wall Street Journal, June 19, 2008 and June 27, 2008; Financial Times, June 15, 2008.)

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3.  Levi Strauss considering moving from San Francisco.  Levi Strauss is considering moving its headquarters from San Francisco to elsewhere in the Bay area, the San Francisco Business Times reported. The jeans maker sent out a request for proposals to Bay area developers and brokers, reportedly seeking space to occupy starting in 2013, after its current lease expires. Levi's has been based in San Francisco since its founding in 1853 and is now controlled by the Haas family, descendants of Levi Strauss. "The company has begun breaking with tradition and appointed Gary Rogers, former chief executive of Oakland-based Dreyer's Grand Ice Cream, as its first outside chairman last year," the article said. "Over the last several years the company had made reducing operating costs a priority."  (Source: San Francisco Business Times, June 20, 2008.)

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4.  Loews exits tobacco business.  Loews Corporation, the conglomerate led by New York's Tisch family, has spun off its tobacco unit, Lorillard, as a stand-alone business. Lorillard's flagship Newport brand is the leading menthol cigarette and "enormously popular among black smokers," the New York Times reported. "[A]ntismoking activists have long had difficulty reconciling the relationship between cigarettes and the civic-minded Tisches," the article said. Recent criticism of Newport in the African American community "has added heat to the controversy." Loews CEO James S. Tisch and two other family members on the Loews board, who together held about 6% of Loews stock, "retained no stakes in the tobacco company or plan to hold executive or board positions in it," the Times noted. Other family members who before the spinoff controlled about 17% of Loews shares "did not disclose whether they would retain those shares or swap them for Lorillard stock." The Times noted that Andrew Tisch, then Lorillard's chairman and CEO, famously appeared with other tobacco industry executives before Congress in 1994 and testified they did not believe cigarettes were addictive. "The next year, while Laurence Tisch was chairman of CBS, the television network drew harsh criticism by killing a planned 60 Minutes segment about a tobacco industry whistle-blower, Jeffrey Wigand," the article said. "The segment ran the following year, after Loews announced plans to sell its CBS stake to Westinghouse."  (Source: New York Times, June 11, 2008.)

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5.  Kerkorian again increases his stake in Ford.  Investor Kirk Kerkorian has bought another 20.8 million shares in Ford Motor Co. "and suggested he could deepen his involvement with the ailing auto maker," the Wall Street Journal reported. "The purchase of additional shares boosts Mr. Kerkorian's stake to 6.5% from 5.6%," the article said. Kerkorian's investment company, Tracinda Corp., said in a regulatory filing that "it could provide additional money to the auto maker to help finance its turnaround plan," the report noted. "Because Ford has a two-tiered stock system, the Ford family continues to control the company, although its stake amounts to about 3% of the company, or roughly half the size of Mr. Kerkorian's holding." On June 2, Ford completed its sale of the Jaguar and Land Rover Brands to India's Tata Motors.  (Source: Wall Street Journal, June 20, 2008.)

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6.  Anheuser-Busch rejects InBev's bid.  Anheuser-Busch Cos. has rejected InBev NV's unsolicited $46 billion takeover bid for the company, and InBev is taking steps to unseat Anheuser's board, according to news reports. In a letter to InBev CEO Carlos Brito, Anheuser said the Belgian-Brazilian firm's $65-per-share offer "is inadequate" and "substantially undervalues" the maker of Budweiser, the Wall Street Journal reported. In a legal filing in Delaware Chancery Court, InBev "indicated it would ask shareholders to sack the Anheuser board in favor of a slate of directors who support InBev's bid, which is a roughly 30% premium to where Anheuser's shares traded before the June 11 proposal," the article said. A Morningstar analyst commented to the St. Louis Business Journal, "This isn't a direct tender offer to the shareholders, but it's very close." Anheuser, based in St. Louis, announce a reorganization plan that it said would save more than $1 billion over the next four years, the St. Louis Business Journal reported. Observers said such a plan may not convince shareholders that the company can raise the stock price. An analyst from Gimme Credit LLC wrote in a note to investors, "We believe a hostile takeover offer is increasingly likely, and [Anheuser] kept the door open," according to a St. Louis Business Journal report. The New York Times reported that Anheuser's rejection of the bid "will formally start what is likely to become a bitter fight that may even spill over to a political debate about Anheuser-Busch ... one of the nation's most prominent family-run companies." The Times noted that unlike some other family-controlled public companies, the Busch family does not control Anheuser through super-voting shares. According to a report by the University of Missouri-St. Louis's KWMU, Missouri Governor Matt Blunt is asking the Federal Trade Commission to review the proposed sale of the company to InBev. Anheuser has attempted to thwart the takeover by acquiring the 50% of Mexican brewer Grupo Modelo that it doesn't already own, but "those talks appear not to have made any progress," the Wall Street Journal reported. Grupo Modelo chairman and CEO Carlos Fernandez resigned from Anheuser-Busch's board of directors, according to a report in the St. Louis Business Journal.  (Sources: Wall Street Journal, June 26, 2008 and June 27, 2008; New York Times, June 26, 2008; KWMU, June 17, 2008; St. Louis Business Journal, June 20, 2008, June 26, 2008, June 27, 2008; June 30, 2008.)

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7.  Fostering shareholder harmony.  Families who follow a set of predetermined rules for resolving disagreements will find it easier to address contentious issues objectively. Perceptive family business leaders are constantly on the lookout for the subtle signals that indicate a disaffected family shareholder. In such cases, the family must work to uncover and resolve the situation. Though the prospect may make some people uncomfortable, open communication can actually strengthen trust. The first step toward fostering harmony in the family ownership group is for all shareholders to understand their responsibilities, as well as the key issues their family and business must face. Family owners must also recognize their duty to sustain their wealth for future generations and to contribute to the community.



For information on creating a shareholder education program to build family harmony and aid in the transmission of family values, see The Family Business Shareholder's Handbook. Learn more about the book and see the table of contents here.

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8.  Protect your business from economic woes.  In the current issue of Family Business Magazine, family business adviser Francois de Visscher suggests some steps business owners can take to ease the impact of today's tough economic climate:


For suggestions on protecting your family from economic woes, plus other tips and strategies for family business owners, see the Summer 2008 issue of Family Business Magazine. Visit our website for subscription information.

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