Porsche, Volkswagen merger talks stall

Merger negotiations between Porsche and Volkswagen have stalled, and Porsche’s family owners “scrambled” to revive them, the Financial Times reported. “The feuding Porsche and Piech families are expected this week to discuss getting the derailed negotiations back on track,” the FT report said. Earlier this month the Porsche and Piech families had agreed to integrate Porsche into VW, but last weekend, VW halted negotiations, saying Porsche had not been “fully transparent” about its financial situation, according to the report. Meanwhile, more than 6,000 employees at three Porsche facilities demonstrated against VW chairman Ferdinand Piech, whose grandfather designed the VW Beetle and founded Porsche, “in a rare display of opposition to an owner of a family held company,” the FT article said. “Piech has long had ambitions of bringing Porsche under VW’s roof and has been working for years to build VW into the world’s leading car company,” a Time.com article noted. (Sources: Financial Times, May 19, 2009; Time.com, May 7, 2009.)

Posted Tuesday, May 19, 2009 • Permalink

Ford will sell new shares to raise up to $2 billion

Ford Motor Co. plans to issue up to 345 million common shares that could raise up to $2 billion, the Financial Times reported. “The proceeds could enable Ford to pay cash for a sizeable chunk of its contributions to a union-managed healthcare trust that would otherwise have been made in shares,” the article said. The Financial Times noted, “The Ford family will remain firmly in control through its holdings of multiple voting stock.” The Wall Street Journal reported that the move indicates Ford “believes investors will pin their hopes on it as General Motors Corp. and Chrysler LLC are consumed by uncertain reorganizations. Ford believes raising the cash is worthwhile despite enduring any backlash from current stockholders who fear shares will be diluted.” (Sources: Financial Times, May 12, 2009; Wall Street Journal, May 12, 2009.)

Posted Tuesday, May 19, 2009 • Permalink

Protesters riot at ArcelorMittal’s shareholder meeting

About 1,000 steelworkers from ArcelorMittal plants in France and Belgium rioted at the company’s annual meeting May 12 in Luxembourg, the Wall Street Journal reported. The workers, who were protesting the company’s plant shutdowns, set off smoke bombs and smashed windows. The company, which expects global steel demand will decline by up to 20% this year, the article said. CEO Lakshmi Mittal told shareholders that “producing steel that could not be sold ... was pointless,” the Journal reported. The local steel union staged a non-violent protest at the company’s Chicago headquarters two weeks earlier over the closure of the ArcelorMittal plant in Hennepin, Ill., the article said. (Source: Wall Street Journal, May 13, 2009.)

Posted Tuesday, May 19, 2009 • Permalink

Buy-sell agreements ease ownership transitions

A carefully crafted buy-sell is essential for smooth transition of ownership upon the occurrence of several key events, notes Anita Grossman of Sagemark Consulting, a division of Lincoln Financial Advisors, in the current issue of Family Business Magazine. These events include:

Death of a shareholder. The business can suffer a financial setback (key person loss). This problem can be compounded if the surviving shareholders must take on the deceased owner’s spouse as a partner. Harmonious transition of the business can be accomplished with a buy-sell agreement that is fully funded with life insurance.
Disability of a shareholder. While most buy-sells take an owner’s death into account, many ignore disability, which could be a more serious financial drain. Of course, the disability agreement should be fully funded.
Departure of a shareholder. When a shareholder leaves, owing to a retirement or for other reasons, his or her interest in the business should be purchased.
Divorce of a shareholder. There should be a provision in the buy-sell that requires the former spouse to sell stock back to the corporation, the original shareholder or the other shareholders.
Deadlock. If equal owners have a major disagreement, the business may be unable to move forward or operate normally. A thorough buy-sell agreement would take this hypothetical circumstance into account.
Disagreement among minority and majority owners. If there is a major disagreement among unequal owners, a minority shareholder could be forced out of active employment. In that case, it would also probably make sense to purchase his or her interest.
Default. In most closely held corporations, the individual shareholders must personally guarantee corporate loans from banks or contribute payments to the bank or the business. There should be a provision stipulating that if a shareholder defaults, a buyout would be triggered for his or her interest.