Hong Kong’s Kwok brothers arrested

Billionaire brothers Raymond and Thomas Kwok, joint chairmen and managing directors of Hong Kong's Sun Hung Kai Properties, were arrested March 29 on suspicion of bribery in connection with an investigation by Hong Kong's Independent Commission Against Corruption.

The Financial Times reported that Sun Hung Kai's board decided at an emergency meeting that the brothers would remain in their positions at the company, which generates annual sales of US$8 billion. Sun Hung Kai was co-founded by the brothers' father, Kwok Tak-Seng, in 1963. The Kwok family owns a 42% stake in the company, which is traded on the Hong Kong exchange.

The FT article noted that in 2008, in a move backed by their mother, Raymond and Thomas Kwok ousted their older brother, Walter, saying that he suffered from bipolar disorder and was unfit to be chairman and CEO. Walter denied having the disorder and said he was removed from his posts because he wanted to investigate the company's contractor relationships and improve its corporate governance. A judge later ruled that Sun Hung Kai should handle the dispute internally, the FT article said.

A separate FT article said Raymond, 59, and Thomas, 60, are "evangelical Christians and extremely devoted to their mother." They opened a theme park based on a replica of Noah's Ark in 2009.

That article said that Walter Kwok was handed the reins when Kwok Tak-Seng died in 1990. "The three brothers appeared to be in accord until 2008, when a bitter battle for control exploded into public view," the report noted. Their mother "managed to stage a successful coup after claiming Walter was unfit for duty," the article said. The report added that according to reports, "the family were furious because Walter, a married man, allegedly had an affair."

The report also said there is speculation that the corruption probe "may be tied to a court case filed by Walter in an effort to save his job." (Source: Financial Times, March 30, 2012.)

Posted Friday, March 30, 2012 • Permalink

Kohler is now a net exporter

A Wall Street Journal report noted that plumbing product manufacturer Kohler Co. has become a net exporter, largely because of high demand in China for its luxury products.

The family-owned company's sales are split about half and half between China and the U.S, but demand is growing much faster overseas, the article said. Kohler has 19 factories in China, Thailand and Indonesia and plans to open its 12th Chinese factory soon, the report noted.

The Journal article also said that Kohler has cut production at its American factories about 30% since 2008, and it has decreased the workforce at its Wisconsin plant from about 2,700 to about 1,800. The company's annual sales dropped from $5.5 billion in 2008 to about $5 billion in 2011, according to the report. (Source: Wall Street Journal, March 29, 2012.)

Posted Thursday, March 29, 2012 • Permalink

CEO’s wife gains influence at Cablevision

Kristin Dolan, wife of Cablevision Systems Corp. CEO James Dolan, has taken on a prominent role at the company as other top executives have left, according to a Wall Street Journal report. Kristin Dolan was promoted in November to senior executive vice president of product management and marketing, overseeing two departments that had been run separately by executives who have left, the report noted.

By all accounts, Ms. Dolan's rise has less to do with nepotism and much more to do with her own vision for the cable industry.

Kristin Dolan is changing Cablevision's marketing approach, focusing on retaining subscribers rather than offering discounts to new customers and attacking the competition, the article said. She wants to create a friendlier corporate brand and make customers aware of the company's perks as well as its services, according to the report.

The article noted that Kristen Dolan wrote her master's thesis on the cable TV business and joined the company in 1990 as an intern at the American Movie Classics network, then part of Cablevision's Rainbow Media Holdings subsidiary, which was spun off last year. She met James Dolan on the job and married him in 2002. (Source: Wall Street Journal, March 27, 2012.)

Posted Wednesday, March 28, 2012 • Permalink

Frank McCourt agrees to sell L.A. Dodgers

Frank McCourt has agreed to sell the Los Angeles Dodgers for $2.15 billion to a group headed by former Los Angeles Lakers basketball star Magic Johnson. The price will be the most ever paid by a professional sports team, according to news reports. Johnson's partners in the group include baseball executive Stan Kasten and film producer Peter Guber. The controlling owner would be Mark Walter, CEO of Chicago-based financial services firm Guggenheim Partners.

The deal will enable McCourt to repay a $150 million loan to the team from Major League Baseball and to fund his $131 million divorce settlement with his ex-wife, Jamie. The deal is set to close by April 30, the same day Frank McCourt must pay the settlement to Jamie McCourt, the Los Angeles Times reported.

The Wall Street Journal pointed out that in light of the $2.15 billion sale price for the team, Jamie McCourt's settlement agreement, in which she agreed to relinquish her interest in the team for $131 million, seems "relatively puny." During the discovery phase of the divorce litigation, both sides hired experts to appraise the team; their valuations ranged from $900 million to about $1.3 billion, the Journal article said.

A New York Times report noted that the Dodgers filed for bankruptcy in June after baseball commissioner Bud Selig blocked a long-term cable TV deal between the team and Fox Sports, saying that too much of the upfront payment would go to McCourt personally to fund his divorce. Selig had criticized McCourt's management of the team, particularly his use of team money for his and his ex-wife's personal expenses, the New York Times report noted.

The LA Times article said reported that McCourt and "certain affiliates" of the new ownership group will be forming a joint venture, which will acquire the property around the baseball stadium for an additional $150 million. Johnson's group will control the parking lots for Dodgers games and work with McCourt on future development, the LA Times article said. (Sources: Los Angeles Times, March 27, 2012; New York Times, March 27, 2012; Wall Street Journal, March 29, 2012.)

Posted Wednesday, March 28, 2012 • Permalink

Bertelsmann is considering an IPO

Bertelsmann, Europe's largest media company, is considering an initial public stock offering, the New York Times' DealBook blog reported. The report noted that the controlling Mohn family, whose ancestors founded the company in 1835, has long resisted a Bertelsmann IPO.

According to the report, Bertelsmann CEO Thomas Rabe said an IPO would finance expansion in digital and international businesses. The company is also considering other options, the article said.

Bertelsmann is changing its legal structure to that of a KgaA, which has been used by other German family-controlled companies that have sold shares to the public, according to news reports. A Wall Street Journal article noted that a KgaA combines elements of a joint stock corporation and a limited partnership "in which the family would essentially retain control of the executive board while new shareholders, or limited partners, could potentially buy stakes in the company."

"The move is a striking turnabout for Bertelsmann and the Mohn family," the New York Times report noted. A Financial Times article pointed out that "An ambition to float Bertelsmann on the stock exchange was one reason for Thomas Middlehoff's departure [as CEO] almost 10 years ago." The FT report said the reversal was due to "the Mohn family's fear of their control being eroded if other investors came aboard."

In 2006, the company paid 4.5 billion euros to buy back 25% of the company from investor Albert Frère. That deal "put the company deep into debt," the Journal article said.

But the FT report noted that this time, the idea to raise funds from outside investors "came from the Mohns themselves." The article pointed out that this coincides with an impending generational change in the family. Christoph Mohn, who like Rabe is 46, has experience running Internet platform Lycos Europe and has provided input to company executives. Christoph Mohn is expected to become chairman of the company's supervisory board this summer, the FT article said.

(Source: DealBook, New York Times, March 28, 2012; Wall Street Journal, March 29, 2012; Financial Times, March 29, 2012.)

Posted Wednesday, March 28, 2012 • Permalink

Syms, Filene’s trade names are for sale

Syms Corp. and Filene's Basement LLC, which both filed for bankruptcy in November, have filed a motion for approval from the U.S. Bankruptcy Court to sell off trade names, the Boston Business Journal reported. Names to be put on the block include the Syms brand, the Filene's Basement name and "Running of the Brides," a former bridal sales event at Filene's stores.

Family-owned Syms acquired Filene's Basement out of bankruptcy protection in 2009. After filing for bankruptcy in 2011, the discount chains closed all of their stores. (Source: Boston Business Journal, March 27, 2012.)

Posted Wednesday, March 28, 2012 • Permalink

Rothschild to step down as Bumi co-chair

Financier Nat Rothschild will step down as co-chairman of Indonesian coal mining company Bumi in a resolution of the dispute between Rothschild and the company's Indonesian shareholders, the Financial Times reported. Rothschild will stay on the board as a non-executive director.

The dispute began when Rothschild criticized the company's corporate governance in a letter leaked to the media, the FT article said.

Indonesian coal-mining tycoon Samin Tan, who became a shareholder in the company in October, will become chairman. The company's CEO and CFO will also be replaced, the article said. Indra Bakrie, who had been chairman, will become co-chairman.

Tan and the Bakrie family had called for Rothschild's ouster from the company but relented under pressure from minority shareholders, the report noted. Tan plans a shake-up at the company, the article said.

In October, the Bakries sold half of their 48% stake in Bumi to Tan in order to refinance a $1.35 billion loan. Tan and the Bakries together now own 30% of Bumi's voting shares. (Source: Financial Times, March 27, 2012.)

Posted Tuesday, March 27, 2012 • Permalink

Wegmans invests in its employees

A recent profile of the Wegmans supermarket chain in The Atlantic focused on the company's investment in its employees. The company's philosophy is that "a happy, knowledgeable and superbly trained employee creates a better experience for customers," the article said.

Wegmans has no mandatory retirement age and has never had layoffs. All profits are reinvested in the company or shared with employees.

Wegmans, which has 79 stores on the East Coast and 42,000 employees, generates $6.2 billion in annual revenues. The company's profit comes from high volume, the article said. Wegmans stores are roughly double the size of a traditional supermarket and have the highest average daily sales volumes in the industry. Second-generation owner Robert Wegman, father of current CEO Danny Wegman, pioneered the greatly expanded store size, the article said.

Executives say the company is also able to invest in its employees and focus on steady, strategic growth because it is not publicly traded.

(Source: The Atlantic, March 2012.)

Posted Tuesday, March 27, 2012 • Permalink

Benetton family hopes going private will lead to turnaround

After 25 years on the Milan stock exchange, the Italian family that owns Benetton is taking the company private. In a deal that was expected to close March 30, the family is buying out the 25% of shares they don't already own for 210 million euros. A Financial Times report noted that the family, led by 76-year-old founder Luciano Benetton and his three siblings, believes the move "is the only way to undertake the profound turnaround needed to make [Benetton] successful again."

The article pointed out that in the past decade, Benetton has been overtaken by "younger, nimbler brands" such as Zara and H&M. The FT report also said that Benetton has an "outmoded business model," with 75% of its revenues built around franchises. About half its sales come from Italy, where retail sales have suffered because of the sovereign debt crisis.

The Benetton family's holding company, Edizione, also has interests in airports, banks and media, the article said.

According to the FT report, company insiders say the delisting "reflects a decision by the founding family members to give control over strategy" to Alessandro Benneton, 48, Luciano's eldest son. The article noted that this move "is the best bet to make the bridge from the founding generation to outside management, get the company to compete against newer rivals and placate family tensions."

It remains to be seen whether [Alessandro] Benetton, who is "in awe" of his father, according to a person close to the family, is tough enough to make the bold changes in product and strategy to revive the brand.

The FT article noted that Alessandro, who has a Harvard MBA, set up his own private equity firm before joining Benetton in 2007. The report said that if he fails to turn the company around, his background "would prove an advantage in a break-up of the group." (Source: Financial Times, March 24-25, 2012.)

Posted Monday, March 26, 2012 • Permalink

James Murdoch resigns from Times Newspapers Holdings board

James Murdoch has stepped down from the board of Times Newspapers Holdings, the New York Times' Media Decoder blog reported.

News Corp. CEO Rupert Murdoch, who is James Murdoch's father, created Times Newspapers Holdings to ensure the editorial independence of British newspapers The Times of London and The Sunday Times after News Corp. bought the papers in 1981, the blog said, citing the company's filings with the British government.

James Murdoch, a central figure in News Corp.'s phone-hacking scandal, resigned from Times Newspapers Holdings' board "in a continuing effort to distance himself from News Corporation's embattled British newspaper unit," the blog report noted. (Source: Media Decoder, New York Times, March 24, 2012.)

Posted Monday, March 26, 2012 • Permalink

Exceptional dividend will help Hermes family

Hermès International will pay an exceptional dividend of 5 euros a share, payable in addition to a 2 euro ordinary dividend, "to reflect exceptional performance," the Financial Times reported. The luxury-goods company reported a 41% increase in 2011 net profit.

The FT report noted that the extra dividend will help the family-controlled company to defend itself against rival company LVMH, which holds a 22.4% stake in the company.

Most of the money will flow to the family which owns 72 per cent of the shares. The family controls Hermès through a limited partnership structure. In December, it also created a 12 billion euro holding company which owns 50.2 per cent of Hermès shares.

The holding company, known as H51, gives family members first right of refusal on share sales, instead of having to sell into the market where LVMH might buy them. One-third of ordinary dividends payable to shareholders stays within the structure and all exceptional dividends.

An analyst told the FT, "The exceptional dividend will ensure there is enough liquidity in the family holding." (Source: Financial Times, March 23, 2012.)

Posted Friday, March 23, 2012 • Permalink

Family business leaders meet with U.S. legislators

A dozen leaders of family-owned and privately held businesses traveled to Washington, D.C., on March 20 and 21 to discuss tax policy with legislators. The trip was organized by Financial Executives International (FEI), a professional association of CFOs and other senior-level financial executives from public and private companies. The business leaders who traveled to Washington are members of FEI's Committee on Private Company Policy and its Private Company Roundtable.

On March 20, the group met with Administration staffers and leaders from both parties and legislative committees, including the House Ways and Means Committee, Senate Finance Committee, Senate Small Business Committee and the Joint Committee on Taxation. They also met with staffers from the offices of the Speaker of the House, House Majority Leader and U.S. Treasury Department.

On March 21, they attended the inaugural meeting of the Privately Held and Family-Owned Business Congressional Caucus, co-chaired by Reps. Peter Roskam (R-Ill.) and Jason Altmire (D-Pa.).

Posted Thursday, March 22, 2012 • Permalink

Last family member leaves Bank Julius Baer

Raymond Baer, the last family member involved in Switzerland's Bank Julius Baer, unexpectedly left his position as chairman, the Financial Times reported.

The FT report said Swiss bankers speculate that the departure of Baer, 52, "was driven, or at least influenced, by the bank's tough negotiations with the U.S. over allegations it helped rich Americans evade tax." The article said bank officials denied that the move was influenced by the U.S. investigation, saying it was a personal decision.

Baer joined the bank in 1988 as head of its capital markets group; at the time, it was a family bank, the article said. He was its head of private banking for ten years.

Although the family's once controlling stake has been diluted to less than 3 per cent, the Baers remain closely associated with the bank, founded indirectly by Mr. Baer's great grandfather in 1890. Mr. Baer holds 1.3 million shares.

The bank said Baer would be chairing an internal committee overseeing cooperation with the U.S. authorities, according to the FT report. (Source: Financial Times, March 20, 2012.)

Posted Tuesday, March 20, 2012 • Permalink

Mets owners settle Madoff suit

Brothers-in-law Fred Wilpon and Saul Katz, owners of the New York Mets, have agreed to pay $162 million to settle a case brought against them by Irving Picard, the trustee for the victims of Bernard Madoff's Ponzi scheme. The settlement was announced the day jury selection was to have begun in the case.

A New York Times report noted that under the terms of the settlement, Wilpon and Katz will receive $178 million from Picard for money they lost in some of their Madoff accounts; that money will be used to repay the $162 million, which they agreed to pay Picard to reimburse Madoff's victims for fictitious profits they made on other accounts. Thus, Wilpon and Katz may not have to pay Picard anything out of their own pockets.

The Times report noted that the Mets have sold all 12 minority stakes in the team that had been marketed since September. Only five of the shares, which sold for $20 million each, were purchased by outsiders, the Times article said. The Wilpon and Katz families bought three of the shares, and the two cable companies that own part of Mets cable network SNY bought four others.

The Times article said the Mets are expected to announce that they have repaid a $25 million loan from Major League Baseball and a $40 million loan from Bank of America. However, according to the report, the team -- which lost $121 million over the last two years and has slashed payroll -- owes about $400 million to a syndicate of banks.

A Wall Street Journal report said the settlement with Picard "apparently was as much about [Wilpon and Katz's] reputations as it was about the money." Former New York Gov. Mario Cuomo, the mediator in the case, told the Journal he sensed that Katz and Wilpon, who contend they were unaware of Madoff's fraud, were upset that their reputations had been "besmirched." (Sources: New York Times, March 19, 2012; Wall Street Journal, March 20, 2012.)

Posted Tuesday, March 20, 2012 • Permalink

Ford extends its revolving credit line by two years

Ford Motor Co. has extended the maturity of a revolving line of credit by two years and increased its size. The $9 billion credit line will now mature on Nov. 30, 2015, instead of Nov. 30, 2013, and has been raised to $9.3 billion, Bloomberg reported.

Ford borrowed $23.5 billion in 2006 to fund a restructuring it needed to survive. The credit line "was a key part of providing needed liquidity for Ford" during the 2008-09 recession, a Wall Street Journal article said.

Ford used the credit line during the 2009 credit crisis, but the company said it hasn't drawn on the it since paying it off in 2011, with the exception of $130 million used for letters of credit, according to the Bloomberg report.

Ford's collateral for the credit line includes its plants and trademarks. The collateral will be released when at least two of the major rating firms raises its rating to investment grade. Currently, the three major rating firms have rated the company as one step below investment grade, the Journal article said. (Sources: Bloomberg, March 15, 2012; Wall Street Journal, March 16, 2012.)

Posted Friday, March 16, 2012 • Permalink

James Murdoch denies attempting to mislead Parliament

News Corp. deputy chief operating officer James Murdoch has written a letter to U.K. lawmakers "expressing regret that he didn't uncover wrongdoing at the British newspaper division sooner, but insisting that he never tried to mislead Parliament about the matter," according to a report in the Wall Street Journal, which is owned by News Corp.

Parliament is due to release a report stating whether it believes News Corp. executives misled lawmakers about the extent of the phone hacking scandal during a 2009 inquiry, the article said.

Murdoch's seven-page letter, made available by the Poynter MediaWire website, said:

It has been suggested that my decision to resign my role at News International reflected past knowledge of voicemail interception or other alleged criminal wrongdoing at News International. This is untrue. I take my share of responsibility for not uncovering wrongdoing earlier. However, I have not misled Parliament. I did not know about, nor did I try to hide, wrongdoing. I do not believe the evidence before you supports any other conclusion.

(Sources: Wall Street Journal, March 15, 2012; Poynter MediaWire, March 15, 2012.)

Posted Thursday, March 15, 2012 • Permalink

N.Y. Times’ executive bonuses are criticized

An article on Slate.com said the New York Times Co.'s executive pay structure "rewards bosses with 175 percent of their target payouts for achieving a mere 2.5 percent return on invested capital."

The article said that Arthur Sulzberger, chairman of the company and publisher of the New York Times, is due for a $2 million bonus if the business delivers a 1.6% return on invested capital and a 7.7% operating cash flow margin on average for the period 2009-2011. He is due up to an additional 75% because the actual return was above 2.5% and the cash flow margin exceeds 9.8%. Departing CEO Janet Robinson also stands to receive both bonuses, the article said.

"That suggests the Times Co. rewards performance that destroys value," the article said. (Source: Slate.com, March 14, 2012.)

Posted Thursday, March 15, 2012 • Permalink

Family of ‘Godfather’ author sues Paramount Pictures

The children of the late Mario Puzo, author of The Godfather, have sued Paramount Pictures, seeking ownership of the film based on their father's novel and $10 million in damages, the Wall Street Journal reported. Puzo died in 1999.

Puzo's three adult children want to publish The Family Corleone, a Godfather prequel they say is based on an unfinished screenplay written by their father. In February, Paramount sued Anthony Puzo in U.S. District Court in Manhattan, seeking to halt publication of the novel, the Journal article said.

The studio contends its 1969 contract with Mario Puzo gave it the rights to sequels and prequels, according to the report. The suit says a 2004 sequel published by the estate, The Godfather Returns, was authorized by Paramount but a 2006 sequel, The Godfather's Revenge, was unauthorized.

Puzo's estate contends that the original contract did not grant Paramount the sequel rights. It contends that Paramount's February suit constitutes a breach of the original contract and seeks to reclaim all rights granted under that contract, including ownership of The Godfather film, the Journal reported. (Source: Wall Street Journal, March 14, 2012.)

Posted Wednesday, March 14, 2012 • Permalink

New CEO named at Books-A-Million

Clyde Anderson has stepped down from his position as CEO of Books-A-Million and passed the reins to Terrance G. Finely, the Birmingham Business Journal reported. Anderson will remain as executive chairman. His family controls the Birmingham, Ala.-based company, which trades on Nasdaq.

Finley, who had been president and chief operating officer, will also continue in those roles, according to the report.

Although Books-A-Million reported a 10.7% increase in net sales for the quarter ended Jan. 31, 2012 and is investing in new stores, its sales fell 3.6% for the fiscal year from the year before. It reported a net loss of $2.8 million in 2011, the journal said. (Source: Birmingham Business Journal, March 13, 2012.)

Posted Wednesday, March 14, 2012 • Permalink

E-mails in Hancock Prospecting feud are released

More than 800 pages of e-mails and documents related to a feud between mining heiress Gina Rinehart and her children were released by New South Wales Supreme Court after Rinehart, Australia's richest woman, lost her bid to keep them private. The documents show that Rinehart's four children may have a stake totaling up to $4.7 billion in a trust that is the center of the dispute, Bloomberg Businessweek reported. Three of the four children are suing to remove Rinehart as trustee. Her youngest child, Ginia, has sided with her in the feud.

In their suit, Hope Rinehart Welker, Bianca Rinehart and John Hancock accused their mother of misconduct "by threatening their financial ruin, giving them a single day to sign an accord extending her control of the trust and lying to them in a bid to sign the agreement," the Bloomberg Businessweek article said.

The children allege that Rinehart changed the vesting date of the trust to 2068 just days before it would have expired -- Sept. 6, Ginia's 25th birthday, The Australian reported. Rinehart claimed that otherwise the family would be bankrupted by tax bills, the Bloomberg Businessweek article said.

Under the constitution of Hancock Prospecting, only a Hancock family group member is entitled to hold and control a share in the company, the Bloomberg Businessweek article said. According to the report, a Sept. 3 e-mail from Rinehart to daughter Bianca indicated Rinehart wanted to be able to sell Hancock shares to a third party or use them as security to raise funds.

Rinehart's father, Lang Hancock, created the trust for the benefit of his grandchildren. The trust holds 23.45% of the company's voting shares. Lawyers said Rinehart would lose management of the company if a new trustee were appointed, the article said.

According to Rinehart's statement of defense, she believes the children lack the business skills and experience to administer the trust, The Australian reported.

In a Sept. 3 letter to the children, according to The Australian, Rinehart wrote:

"Bankruptcy is not in the financial interests of the beneficiaries. It may however be reasonably arguable that personal development-wise it would be in the best interests of the beneficiaries to force them to go to work and reconsider their holidaying lifestyle and attitudes."

(Sources: Bloomberg Businessweek, March 12, 2012; The Australian, March 13, 2012.)

Posted Tuesday, March 13, 2012 • Permalink

Chairman’s wife set to join VW’s supervisory board

Ursula Piëch, wife of Volkswagen chairman Ferdinand Piëch, will stand for nomination to VW's supervisory board at the company's annual general meeting in April. The Wall Street Journal noted that because the Porsche-Piëch family controls the majority of the company's voting rights, "her election is all but certain."

Ferdinand Piëch is the grandson of Ferdinand Porsche, who was asked by Hitler to design the VW Beetle. Piëch has "attracted controversy from many international investors over corporate governance amid numerous boardroom intrigues," the Financial Times reported.

Sanford Bernstein analyst Max Warburton told the FT:

"It's a good reminder to investors about what this company is -- the personal fiefdom of the Porsche and Piëch families."

The family members "are split between Germany and Austria, and often at odds," the Journal report noted. The Journal article said:

So long as Volkswagen's performance has shined, outside investors have tolerated that entanglement.

Volkswagen has tried to take over Porsche, efforts that are "the result of a power struggle between Mr. Piëch and his milder-mannered cousin Wolfgang Porsche," the Journal article said. Plans for a formal merger of the companies are now on hold, according to the Journal report.

Porsche SE bought a 51% stake in VW before the 2008 financial crisis, which caused it to accumulate $13 billion in debt. VW rescued Porsche by buying a 49.9% stake in Porsche's sports-car operations in 2009. The Journal said VW is exploring a plan that would allow it to exercise options to buy the rest of Porshce, a move that would "turn Porsche SE into a holding company with one asset -- its stake in Volkswagen" and would preserve Ferdinand Piëch's interests.

The FT article called CEO Martin Winterkorn, whose contract runs until 2016, Piëch's "acolyte."

In 2010, Ferdinand Piëch transferred his holdings, including shares in Porsche's holding company, into two foundations and named Ursula Piëch as their guardian in the event of his death, the article said.

The Journal report said Ursula Piëch "is said to play a key role in refereeing squabbles among family members." (Sources: Wall Street Journal, March 14, 2012; Financial Times, March 12, 2012.)

Posted Monday, March 12, 2012 • Permalink

British regulator investigating Murdochs, BSkyB

Britain's communications regulator is investigating whether British Sky Broadcasting is a "fit and proper" owner of a broadcasting license in the wake of phone-hacking and bribery scandals facing News Corp., the Financial Times reported. News Corp. holds a 39.1% stake in BSkyB. The investigation, which began in January, has escalated, according to the FT report.

The FT article said the increased scrutiny is "a setback to James Murdoch," who remains chairman of BSkyB, although he stepped down as executive chairman of News Corp.'s News International unit last month.

The report noted that if the regulator rules against James Murdoch and News Corp., "it could threaten James Murdoch's position as chairman of BSkyB or trigger a process that would force News Corp., chaired by Rupert Murdoch, to cut its stake in BSkyB to a level at which it was no longer deemed to exercise control."

Last year, News Corp. withdrew a bid to take full control of BSkyB as the extent of the phone-hacking scandal was made public. (Source: Financial Times, March 9, 2012.)

Posted Monday, March 12, 2012 • Permalink

Forbes Media seeks to refinance loan

Forbes Media is seeking to refinance a $50 million loan that's coming due in July, New York Post columnist Keith J. Kelly reported. The company underwent a default and a restructuring in 2009-10, Kelly noted.

Citing anonymous sources, Kelly reported, "None of the half-dozen banks that handled the restructuring want to be involved again."

In 2006, Elevation Partners, which includes Bono, singer for the band U2, paid $237.2 to take a 45% stake in the company.

Kelly cited sources who said Forbes Media lost $19.7 million in 2009. Last year, Forbes had earnings before interest taxes, depreciation and amortization of $10.7 million on total revenue of $125 million, Kelly wrote.

Mike Perlis, who last year became Forbes' first non-family CEO, did not comment for Kelly's report. (Source: New York Post, March 6, 2012.)

Posted Wednesday, March 07, 2012 • Permalink

Peugeot launches rights issue to fund GM alliance

PSA Peugeot Citroën launched a 1 billion euro rights issue to fund its alliance with General Motors, which will take a 7% stake in the French automaker, the Financial Times reported.

Peugeot plans to use the share offer proceeds to launch a low-carbon-dioxide, small-car platform and expand in emerging markets along with GM, the article said.

GM and Peugeot's controlling family shareholders will between them take up about 31 per cent of the offer. The Peugeot family will pay 140 million euros for its shares and retain its position as the company's largest shareholder, with 25.2 per cent of PSA's capital and 37.9 per cent of voting rights.

(Source: Financial Times, March 7, 2012.)

Posted Wednesday, March 07, 2012 • Permalink

Publisher’s son moves to N.Y. Times metro desk

Arthur G. Sulzberger, son of New York Times publisher Arthur Sulzberger Jr., is moving from the paper's Kansas City bureau to the metro desk in New York City, according to an internal Times memo made public on the website Gawker.com.

The memo said the younger Sulzberger first worked on the metro desk in 2009and covered Brooklyn federal court in 2010 before moving to Kansas City to open the bureau. (Source: Gawker.com, March 6, 2012.)

Posted Wednesday, March 07, 2012 • Permalink

Pizza chain’s former owners sued by bankruptcy trustee

The former owners of Giordano's Enterprises, a Chicago pizza chain, have been accused in two lawsuits filed by a Chapter 11 bankruptcy trustee of selling two profitable downtown locations to their sons at below-market process to shield the two restaurants from creditors and provide their children with income, the Chicago Tribune reported.

John and Eva Apostoulou orchestrated the sale of one location to their son Basil and another to their son George on June 30, 2008, for $2.5 million each. Lawsuits filed by bankruptcy trustee Philip Martino in U.S. Bankruptcy Court in Chicago said each restaurant could have been sold for $5 million in an arm's-length transaction, the article said. The two locations were sold to the Apostoulous' sons before the chain filed for bankruptcy.

The lawsuit said the chain's financial trouble stemmed from a "Florida real estate buying frenzy." Between 2004 and 2008, the Apostoulous bought 161 condominium units near Walt Disney World; between 2005 and 2006, they bought vacant land near Disney World, on which they planned to build condo units and a strip mall, the article said. About $12.8 million in financing for the real estate purchases came from the pizza business, according to the report. The Apostoulous defaulted on many of the loans and owed $2.5 million to the IRS after Florida's real estate bubble burst, the article said.

The lawsuit said the sale of the two locations to the Apostoulous' sons "amounted to nothing more than a sweetheart deal between family members to shelter a valuable asset from the creditors of the Apostoulous and Giordano's Enterprises." The suit asks Basil and George Apostoulou to pay at least $2.5 million each to the bankruptcy estate.

The company-owned stores were auctioned in November 2011 in bankruptcy court. Basil and George Apostoulou transferred their two restaurants in return for an ownership stake in VPC Pizza Operating Corp., which bought Giordano's Enterprises restaurant and franchise business from the bankruptcy trustee, the article said. (Source: Chicago Tribune, March 6, 2012.)

Posted Wednesday, March 07, 2012 • Permalink

Mets must pay up to $83.3 million to Madoff victims’ trustee

A U.S. District Court judge has ruled that New York Mets principal owner Fred Wilpon and his family, businesses and charities must pay up to $83.3 million to Irving Picard, the trustee trying to recover funds for victims of Bernard Madoff's Ponzi scheme, ESPN reported.

Judge Jed S. Rackoff also ruled that the parties will go to trial March 19 over an additional $303 million sought by Picard, the article said.

The $83.3 million represents the amount Picard contends that the Wilpons made in the two years preceding Madoff's arrest. The Wilpons contend that they are among the losers because they thought they had $500 million invested with Madoff at the time authorities discovered his scheme, although they withdrew more money than they had deposited with Madoff, the ESPN report noted.

The additional $303 million represents the principal the Wilpons invested with Madoff. Picard contends the Wilpons had warning signs that Madoff's scheme was a fraud. Rakoff wrote in his decision that although is skeptical that Picard can prove the Wilpons acted in bad faith, there is enough evidence for a trial to proceed, according to the ESPN report.

The $83.3 million figure is a cap because the judge will determine whether Picard's calculation is correct and which of the Wilpon family members and entities will have to pay, a bankruptcy attorney told ESPN.

Any member of Wilpon's party seeking to appeal the ruling likely will be required to post a bond worth 110 percent of Rakoff's verdict against them. That would ensure that Picard ultimately will collect the money if the ruling is not overturned by a higher court.

(Source: ESPN, March 5, 2012.)

Posted Monday, March 05, 2012 • Permalink

Ikea’s Ingvar Kamprad is Europe’s richest man

According to the Bloomberg Billionaires Index, Ikea founder Ingvar Kamprad is Europe's richest man. Bloomberg values his fortune as more than $40 billion, Kamprad controls Ikea through a network of holding companies and legal entities, a Bloomberg report said.

Ikea reported that it earned $4 billion in net profit in 2011 and had operating income of nearly $5 billion and gross profit of more than $15 billion on $34 billion in sales, Bloomberg said. These figures were the basis of Bloomberg's analysis.

In 1982, Kamprad gave his stake in the company to the Stichting INGKA Foundation. The foundation owns all the shares in INGKA Holding BV, which in turn owns about 90% of Ikea stores worldwide, the Bloomberg article said. In 1989, Kamprad established the Interogo Foundation, based in Liechtenstein, which owns the rights to the Ikea concept. Interogo is controlled, but not owned, by the Kamprad family.

Kamprad's family's private investment vehicle, the Ikano Group, is based in Luxembourg and is worth about $2 billion. It is chaired by Peter Kamprad, one of Ingvar Kamprad's three sons. The Ikano Group runs consumer credit, asset management, real estate management and insurance businesses and also owns four Ikea franchise stores in Asia, the Bloomberg report said. Also, Stichting IMAS Foundation manages dividends earned from Ikea's main franchisee, INGKA Holding, the article said.

Kamprad moved from his native country, Sweden, in the 1970s. He has said that because of tax laws in Sweden at the time, he couldn't keep the company private if he stayed there, according to Bloomberg.

Since 2009, Stichting INGKA Foundation's philanthropic goal has been to provide opportunities for young people in developing countries. Between 2009 and 2011, the Ikea foundation, a Dutch philanthropic arm, donated about $235 million to disaster relief and aid in Kenya, Somalia, Haiti and China, the article said. Another foundation, the Kamprad Family Foundation, supports research and education in Sweden.

Specialists in trust and foundation law in Holland and Liechtenstein told Bloomberg that the foundation structure doesn't preclude the sale of Ikea assets, though it complicates such a transaction. Amsterdam corporate attorney Ep Hannema told Bloomberg:

"The idea with a structure such as this is to create continuity so that if the founder dies, no manager who owns shares or family member who owns shares can take control individually. Downstream there are possibilities for anyone who wants to, to minimize the amount of profits that flow to the foundation. It's just not very clear to the outside world."

Werner Haslehner of the London School of Economics told Bloomberg:

"The purpose for one of these entities is to separate assets from the original owner in order to preserve wealth. One of the main reasons for someone to create one of these is to create something that will outlive their heirs."

(Source: Bloomberg, March 4, 2012.)

Posted Monday, March 05, 2012 • Permalink

Son takes over at Hong Kong property empire

Cheng Yu-tung, 86, has relinquished the helm of New World Development Co. and is being succeeded by his eldest son, Henry, 65, the Wall Street Journal reported. Cheng Yu-tung is one of Asia's richest people and was one of the first developers to invest in the People's Republic of China, the article said. Cheng Yu-tung, who is said to be in declining health, will become chairman emeritus.

The Journal report noted that Cheng Yu-tung has been stepping back from day-to-day management and has focused on grooming his grandchildren. Henry's son Adrian, 32, has been named joint general manager of New World along with Chen Guanzhan, a former university lecturer and a Chinese official. Henry's daughter Sonia, 31, was appointed to the company's board, the article said.

The report noted that while other octogenarian Hong Kong property tycoons are still at the helm, "The Cheng family is seeking to carry out a more orderly transition." The article pointed out that Henry succeeded his father as New World's managing director in 1989.

The article said Henry Cheng had earlier diversified New World's businesses by investing in television and hotels. "But some of the acquisitions proved unprofitable, leaving New World sagging with debt and forcing Cheng Yu-tung in the early 1990s to return to a higher profile." (Source: Wall Street Journal, March 1, 2012.)

Posted Friday, March 02, 2012 • Permalink

Peugeot and GM finalize agreement

General Motors and PSA Peugeot Citroën have agreed to an alliance in which GM will purchase a 7% stake in Peugeot. The companies said they expect partnership will produce annual savings of about $2 billion, though for the first two years savings will be limited as both companies restructure their unprofitable European operations, the New York Times reported.

GM will acquire the Peugeot shares as part of a 1 billion euro rights offering that will be underwritten by a syndicate of banks and will "include an investment by the Peugeot family aimed at instilling confidence in the alliance's success, the Times article said.

GM will become Peugeot's second-largest shareholder after the Peugeot family, which owns about 30%.

A Wall Street Journal article said the alliance "represents the first significant move in decades by the French auto makers founding Peugeot family to reduce its controlling interest." Credit Suisse analyst Erich Hauser told the Journal he estimates that the family's voting shares will decrease from about 46% to 40%. The Journal article said:

Their decision to lessen the size of the family stake is partly a function of the tough conditions in Europe's car market.

The Journal report noted that the family's stake in Peugeot Citroën is valued at 1.09 billion euros and "is held through a holding company controlled by three family-owned concerns that has refusal rights on any shares offered by family members." The Journal article noted:

Family members have stepped in when they felt the company's interests weren't being served by its executives.

The family fired a CEO in 2009 and vetoed a plan to deepen Peugeot's partnership with Mitsubishi in 2010, the Journal pointed out.

Analyst Peter Nesvold told the New York Times that Peugeot stood to benefit more than GM from the alliance.

The Financial Times reported that after news of the alliance, Moody's Investors Service downgraded Peugeot Citroën's debt rating to junk status. Moody's said Peugeot faced "tremendous operational stress" and cited upfront expenses due to the alliance. (Sources: New York Times, Feb. 29, 2012; Wall Street Journal, March 1, 2012; Financial Times, March 2, 2012.)

Posted Friday, March 02, 2012 • Permalink

Transitions East 2012 nearing capacity

More than 85% of the spaces at the Transitions East 2012 conference have been filled. Interested families are advised to register soon.

The event is the fourth in a series of conferences presented by Family Business Magazine and Stetson University's Family Enterprise Center. Transitions East 2012 will be held April 25-27 at the Grand Bohemian Hotel in Orlando, Fla.

The conference -- created by family companies for family companies -- will focus on three key touchpoints:

• Family Employment Policies: Landmarks and Landmines
• Ownership Strategies for Multi-Generational Family Enterprises: Who Can and Should Own What?
• The Family Enterprise and the Extended Family: Fostering Cooperation and Resolving Conflict Among Siblings, Cousins and Married-Ins

The following family business stakeholders will speak at the conference.

• Eric Allyn, Board Member, Welch Allyn
• Julie Appling, Board Member, Eddy Family Council
• Karen Bichin, Manager, Community Relations, ABC Recycling
• Paul C. Darley, President & CEO, W.S. Darley & Co.
• Ben and David Grossman, Co-Presidents, Grossman Marketing Group
• Felix Grucci Jr., Past President, Fireworks By Grucci
• Chris Herschend, Board Member, Herschend Family Entertainment
• Richard C. Kessler, chairman and CEO, The Kessler Collection (owner of the Grand Bohemian Hotel) and his children, Larua Kessler Van Til and Mark Kessler
• Terry Kohler, Owner, Windway Capital Corp.
• Charlotte Lamp, Ph.D., a third-generation shareholder of Port Blakely Companies
• Steve Landaal, President, Landaal Packaging Systems
• Jill Lundberg, Lundberg Family Council
• Joan McVaugh, Finance Manager/Family Council Chairperson, Laboratory Testing Inc.
• Jack Mitchell, Chairman and CEO, Mitchells Family of Stores
• Jamie Richardson, Vice President, Corporate Relations, White Castle
• Preston Root, President, Root Family Board of Directors
• Tim Schultz, Vice President of Administration, Lundberg Family Farms
• Sylvia Shepard, chair of Menasha Corporation's family council
• Harold L. Yoh III, chairman and CEO, Day & Zimmermann Inc.

Early-bird registration discounts expire on March 16.

The event's Platinum sponsor is PwC. The Gold sponsors are Bessemer Trust, Wells Fargo Family Wealth and Bernstein Global Wealth Management. The Silver sponsors are Withers Bergman LLP and Prowell Financial Management. Bronze sponsors are Pitcairn, the University of Pittsburgh Joseph M. Katz Graduate School of Business, CFAR, Drinker Biddle and Evercore Wealth Management.

To view the complete conference agenda and speaker bios and to register, visit www.familybusinessmagazine.com/transitions

To register by phone/email, or if you have questions, contact Justine Wood, Transitions Program Manager, at (JavaScript must be enabled to view this email address) or (703) 850-5497.

Posted Friday, March 02, 2012 • Permalink