Family
Business Magazine E-Newsletter
July
10, 2008
Contents
1.
Family Business Magazine
receives awards.
2.
Investment firm acquires a 20% interest in Crane & Co.
3.
XTO agrees to buy Hunt Petroleum; family feud reignited.
4.
Washington Post names new
editor.
5.
Ex-official sues NASCAR for racial, sexual discrimination.
6.
Reliance Communications and MTN extend talks, try to restructure deal.
7.
InBev to acquire Anheuser-Busch for $52 billion.
8.
Outside directors can help resolve disputes, avoid scandal.
9.
Trust trade-offs.
1. Family
Business Magazine receives awards. Family Business Magazine has been
honored with several trade press awards. The magazine received two Apex
Awards for Publication Excellence, which recognize excellence in
publications work by professional communicators. Family Business's Autumn 2007 issue
received an Apex Award in the "Magazines & Journals -- Print Over
32 Pages" category. An article in that issue, "The War Against Family
Control" by James E. Barrett, received an Apex Award in the "Editorial
& Advocacy Writing" category. The Autumn 2007 issue also received
an Honorable Mention in the Trade, Association and Business
Publications International's Tabbie Awards competition, "Best Single
Issue" category.
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2. Investment firm acquires a 20%
interest in Crane & Co. The Crane family has agreed to
sell a 20% ownership stake in Crane & Co., the Dalton, Mass.,
paper-making business it has controlled for 238 years, to an affiliate
of New York-based investment firm Lindsay Goldberg LLC, the Berkshire Eagle reported. Chairman
and CEO Charles Kittredge, a member of the Crane family, told the paper
that the deal will raise funds "to satisfy family members who have been
seeking to liquidate some of their company shares." The article said
that until the 1960s only "a handful of male family members" owned
shares, "but in recent decades shares in the business have been passed
on to more family members, many of whom have no direct ties with the
Crane business." The report noted that about 90 family members are
shareholders. Kittredge also told the paper that the company needed
access to capital to expand its business and for possible acquisitions.
Alan Goldberg and Robert Lindsay, Lindsay Goldberg's co-managing
partners, will have seats on the company's board, the article
said. (Source: Berkshire Eagle,
July 10, 2008.)
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3. XTO agrees to buy Hunt Petroleum;
family feud reignited. XTO Energy agreed to buy the Hunt
Petroleum Corporation for about $4.2 billion in cash and stock, but
Albert Hill III, a great-grandson of H.L. Hunt -- who founded the
company by investing money won in poker games -- was considering trying
to stop the sale because he thought the price was low, the New York Times reported. The deal
is "adding fuel to the fire of a family feud embroiling the Texas
dynasty," the article said. The Times
reported that Hill "filed a lawsuit against his father and
various other family members last November accusing them of mismanaging
up to $4 billion in assets, including Hunt Petroleum.... Mr. Hill
contends that his relatives plotted to remove him and his family from
two family trust funds because he opposed their plan to sell Hunt
Petroleum and divide the proceeds. He has also contended that his
relatives have perpetrated fraud and tax evasion, accusations they say
are raw mudslinging based on nothing more than a father-son squabble."
A lawyer for Thomas Hunt, who oversees the two trusts, denied Hill's
accusations that the sale was an attempt "to dump the company and run"
and predicted the deal will proceed without delay. Hill's father, Al
Hill Jr., "has tried to rescind documents he previously signed to make
his son a beneficiary of the trusts," the Times reported. (Source: New York Times, June 11, 2008.)
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4. Washington
Post names new editor. Katharine Weymouth,
appointed in April as the fourth-generation publisher of the Washington Post, has named Marcus
Brauchli to succeed Leonard Downie Jr. as executive editor. Brauchli
resigned in April as managing editor of the Wall Street Journal. "The choice is
a break from tradition at the newspaper, which had promoted from within
in the past," Portfolio.com reported. Downie "has spent virtually his
entire career at the Post;
his predecessor, Ben Bradlee, was executive editor for 26 years.
Weymouth and Brauchli face daunting challenges; circulation and
advertising revenue are falling. "Trained as a lawyer ... Weymouth
quickly began the search for her own top editor to reinvent the
newspaper of the 21st century -- a choice as risky as it is important
to her success as publisher -- and made her decision with surprising
speed," the Portfolio.com article said. The Wall Street Journal reported that
"current and former staffers expect one of the new editor's first tasks
may be further downsizing the newsroom and reorienting Post staffers to a paper with a
narrower editorial mission and a greater focus on the Web." The Journal added that the Post "has been a model of stability
in a turbulent industry.... Thanks to the Post Co.'s hugely profitable
Kaplan education businesses, the paper until recently wasn't under the
pressure that has swept the industry.... But the sputtering economy and
the continued flight of readers and advertisers to the Web have dealt
the Post too big a blow for
it to sit still." (Sources: Portfolio.com. July 7, 2008; Wall Street Journal, July 7, 2008.)
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5. Ex-official sues NASCAR for
racial, sexual discrimination. Former NASCAR technical
inspector Mauricia Grant has sued NASCAR for $225 million, alleging 23
incidents of sexual harassment and 34 incidents of racial and gender
discrimination. Grant, who is African American, began working for
NASCAR in January 2005 and was fired in October 2007 for what NASCAR
said was poor performance. She alleges the real reason was retaliation
for her discrimination and harassment complaints; NASCAR denies the
allegations. Her lawsuit, posted on TheSmokingGun.com, contends that
she was called demeaning names and was subjected to lewd comments and
unwanted sexual advances. She also alleges that two male co-workers
exposed themselves to her. NASCAR suspended officials Tim Knox and Bud
Moore, the two officials accused of exposing themselves. Brian France,
NASCAR's third-generation chairman, said NASCAR would review the
claims; in a news conference, he said the suspensions should not be
construed as an admission of wrongdoing. "The most disappointing thing
to me is that we found out about these alleged claims after you did in
the media via a national lawsuit that seeks a lot of money," France
said, according to an article posted on NASCAR.com. "That's very
disappointing because if any of those claims turn out to be accurate
and have substance, we would have liked to have known about that two
years ago so that we could have reacted and done something about it --
because it's inconsistent with anything, from a policy statement, about
how a work environment for our officials should be," France said. The
NASCAR.com article added, "The crux of the lawsuit appears to center
around the differences of opinions concerning Grant's claims that she
reported several incidents of alleged harassment, and NASCAR's claims
that it has been unable to uncover any evidence that she ever did."
Commenting on France's remarks, FoxSports.com contributor Kevin Hench
wrote, "[I]nstead of being sympathetic to the alleged victim -- or even
pretending to be sympathetic -- France belabored his disappointment in
the way Grant chose to air her grievances and suggests that seeking
compensation somehow diminishes the validity of the charges.... It's
telling that France seemed more obsessed [at the news conference] with
Grant's supposed breach of company protocol than with the 57 breaches
of federal law that she alleges in her suit. A cynic might even find
his remarks revelatory of a culture in which coming forward would be
very difficult." Yahoo!Sports legal analyst Craig Silverman, in an
interview on Yahoo.com, said that in Grant's lawsuit, "She not only has
quality allegations of prejudice and sexism, she has a whole bunch of
them from a whole bunch of NASCAR officials. That's what makes this
unusual. In a lot of cases, you see one person doing the harassing, or
maybe two, and some of these allegations are subject to
interpretation.... But in this case, most people can see the big deal.
It really would make a person in Mauricia Grant's position tremendously
uncomfortable in the work place." Silverman told Yahoo!Sports that
"This case could cost many millions of dollars to litigate."
(Sources: TheSmokingGun.com, June 10, 2008; NASCAR.com, June 14, 2008;
MSN.FoxSports.com, June 15, 2008; Sports.Yahoo.com, June 13, 2008.)
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6. Reliance Communications and MTN
extend talks, try to restructure deal. India's Reliance
Communications Ltd. and South Africa's MTN Group Ltd. have agreed to
extend their merger talks from the original self-imposed deadline of
July 9 to July 21, the Wall Street
Journal reported. The potential deal has been affected by a
feud between Reliance Communications chairman Anil Ambani and his older
brother Mukesh Ambani, chairman of Reliance Industries, who clams that
his company has the right of first refusal over Reliance
Communications. "Originally the talks were centered on a deal that
would be structured as a takeover of Reliance Communications by MTN,"
the Journal reported. "But
since the challenge from Reliance Industries, Reliance Communications
has been trying to structure a deal in which it would take over MTN." A
restructuring, however, would raise "political issues created by the
possible takeover of an important South African company by a foreign
operator," the article said. The Journal
noted that "Anil Ambani isn't likely to take a larger stake than
49% in MTN, given the political hurdles and other factors.... [He] is
expected to relinquish his 66% of Reliance Communications, and to
become a 49% shareholder in MTN." (Source: Wall Street Journal, July 10, 2008.)
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7. InBev to acquire Anheuser-Busch
for $52 billion. Anheuser-Busch Cos. has agreed to be
acquired by Belgian-Brazilian brewer InBev NV for about $52 billion, or
$70 a share. Anheuser will have two seats on the board of the combined
company, which will be named Anheuser-Busch InBev, "fulfilling a
promise by the Belgian company to include the Anheuser name in the new
brewer's title," the New York Times
reported. One of the board seats will go to Anheuser CEO August A.
Busch IV. "When InBev announced its initial $46.3 billion offer last
month, Anheuser mounted a fierce defense," the Times report noted. "It drew upon
its heritage and its history as a major benefactor of its hometown [St.
Louis], and argued that it could increase its profits alone.... The
battle grew nasty early on, as both Anheuser and InBev reported to
lawsuits as bludgeons. InBev had [begun] a campaign to oust Anheuser's
board, while Anheuser accused its suitor of lying about its financial
commitments and criticized its beer business." In an earlier report,
the Times said a key factor
in the negotiations talks "was the indication that some of Anheuser's
largest shareholders, including Warren E. Buffett, were leaning toward
backing a deal with InBev." Another turning point, according to the St. Louis Post-Dispatch, "may have
been the lukewarm reception that Anheuser-Busch's new strategic plan --
ostensibly a bid to remain independent -- garnered among investors
after it was announced on June 27, analysts said." On July 7 -- before
the two parties began talks -- InBev filed a preliminary consent
solicitation statement with the Securities and Exchange Commission,
seeking to remove Anheuser's directors and replace them with its own
slate. The proposed new directors included Adolphus Busch IV, uncle of
Anheuser president and CEO August Busch IV, a signal that InBev
"showed little hesitation in going hostile," the Times report said. The Wall Street Journal noted that the
deal "closes the book on an American corporate dynasty. Anheuser and
its predecessor companies have been led by members of the Anheuser or
Busch families for most of the past 156 years.... But the Busch family
owns a small fraction of the company's stock, and Anheuser directors
were sensitive to their duty to serve public shareholders." According
to the Post-Dispatch report,
"analysts believe that InBev will sell off [Anheuser's] theme parks and
packaging divisions." The paper noted that Mexican brewer Grupo Modelo,
half of which is owned by Anheuser-Busch "said it has been in active
discussions with InBev about how the two companies can be together if
Modelo consents to InBev's becoming a minority owner through its
acquisition of Anheuser-Busch." (Sources: New York Times, July 11, 2008 and
July 14, 2008; St. Louis
Post-Dispatch, July 14, 2008; Wall
Street Journal, July 14, 2008.)
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8. Outside directors can help resolve
disputes, avoid scandal. Family business owners who are
hesitant about professionalizing their firms need only recall the
corporate scandals that occurred at Adelphia Communications Corp. and
Parmalat SpA -- both family-controlled companies -- in the early 2000s.
A truly independent board of directors -- one that includes members
from outside the family and the company -- can help a family company
avoid problems of self-dealing and perk abuses that make lenders and
insurers nervous and, in the extreme, can disgrace the family name. Of
course, scandal avoidance is not the only reason to institute a board
and empower its members to hold management accountable. A board of
directors (or, for companies not yet ready to take that step, an
advisory board) also can help resolve family disagreements, offer
additional business expertise and resolve dilemmas involving
succession, strategic planning and other pressing matters.
For information
on how to establish a board and how independent directors can help your
company, see the newly published Family
Business Shareholder's Handbook. Learn more about the book and
see the table of contents here.
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9. Trust trade-offs.
"Countless family businesses have placed operating family businesses
under the control of trusts," writes family business adviser James Olan
Hutcheson in the current issue of Family
Business Magazine. "They have good reasons for doing so. Trusts
can reduce or, in some cases, even eliminate estate taxes. They can
protect business assets against claims arising from divorce, creditors
or lawsuits. They can allow business leaders to take care of heirs who
are too young, not business-minded or otherwise incapable of managing
the affairs of the company." However, Hutcheson adds, trusts involve
trade-offs. "They can become complex entities that may require the help
of professional advisers to set up and maintain," he notes. "Trusts may
involve a loss of direct control of the assets. Problems sometimes
occur if later generations feel they are competent to manage their
affairs. Trusts may serve as focal points for discontent and conflict
among family members who view the trust and its management as anything
but a benefit. The potential problems in such cases can be tough to
overcome, especially in the cases of dynasty trusts intended to
preserve assets across multiple generations."
For Hutcheson's
advice on establishing trusts, plus other advice on sustaining your
family firm for future generations, see the Summer 2008 issue of Family Business Magazine. See here for information on how
to subscribe.
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