Herbalife Trustees Win Round In Battle With Founder’s Wife

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Herbalife Trustees Win Round In Battle With Founder’s Wife

WALL STREET WEST

A Superior Court judge said he would dismiss a lawsuit seeking to remove the trustees of the estate of Herbalife founder Mark Hughes, who died in 2000 of a drug and alcohol overdose.

In a ruling made public last week, Judge Thomas Stoever said he found “no evidence” that the trustees of the Hughes Family Trust, which controls a $250 million fortune to benefit Hughes’ only son, Alexander, abused their fiduciary discretion.

In May 2001, Hughes’ ex-wife, Suzan, filed suit seeking to remove the three trustees, each of whom was a Herbalife executive and received a large payout when the Los Angeles-based company was sold for $685 million to two investment firms in July 2002.

Suzan Hughes claimed that the trustees including Jack Reynolds, the child’s paternal grandfather had engaged in self dealing, violating their fiduciary duties due to conflicts of interest and animosity toward Alexander and Suzan, his mother.

Suzan Hughes’ lawyer, Hillel Chodos, said the dismissal would be appealed as soon as it is signed next month.

“I believe that Suzan brought the case because she’s looking after her son Alex and hopes to ultimately vindicate her position,” Chodos said.

Meanwhile, lawyers for the Hughes Trust said they filed motions to recoup $1.2 million in attorneys’ fees spent defending Suzan Hughes’ efforts to replace the trustees. “The false allegations brought against us as to our integrity and fairness were hurtful particularly to Mr. Reynolds who is Alex’s grandfather,” said Conrad Klein, another of the trustees.

Anthony Palazzo

Settling Debts

VCA Antech Inc. has filed to sell 9 million shares of common stock in a secondary offering.

Los Angeles-based VCA, which operates a nationwide network of animal laboratories and veterinary hospitals, plans to sell 3.3 million shares in the deal to pay off debt, according to a Securities and Exchange Commission filing. Existing shareholders, including Los Angeles private equity firm Leonard Green & Partners LP, will sell the remaining 5.7 million shares.

Goldman Sachs & Co. and Credit Suisse First Boston are underwriting the deal.

“We hope to close the deal by the end of the month if all goes well,” said Tom Fuller, VCA’s chief financial officer.

In a secondary offering, shares are typically priced near the closing price the evening before the offer. VCA’s stock was trading in the $15 range last week, thus the offering should net the company about $50 million. VCA said it plans to use the proceeds to retire $36.7 million in debt, which carries a 15.5 percent interest rate, and for general corporate purposes.

VCA Antech, formerly Veterinary Centers of America, had been public for nine years before being taken private by Leonard Green in 2000. The company raised $176 million when it went public for a second time in November 2001. That offering was priced at $10 a share.

VCA Antech reported net income of $7 million for the third quarter ended Sept. 30, up from a loss of $3.3 million in the like-year earlier quarter. Third-quarter revenues were $115 million, vs. $102.6 million in the third quarter of 2001.

Conor Dougherty

Doing Deals

Looking to bolster its overseas presence, Image Entertainment Inc., a DVD licensing company, recently signed two international deals to consolidate its broadcast and DVD distribution partners.

On Jan. 8th, Chatsworth-based Image signed a five-year home video distribution deal with Bertelsmann Music Information Services, a unit of Bertelsmann AG. The deal gives Bertelsmann the right to distribute Image’s licensed DVD programming throughout Europe, the Middle East and Africa. Bertelsmann will advance Image $3 million, recoupable against future royalties owed to Image.

Currently, Image uses a network of independent distributors and studios, including Bertelsmann, to distribute its DVD content internationally. Most of those rights expire in March, Image said, at which point Bertelsmann will take over.

“It’s great to have one company that’s able to handle all of our (international DVD) distribution as opposed to fragmenting,” said Garrett Lee, vice president of marketing for Image Entertainment.

Lee said Bertelsmann will receive the rights to distribute about 100 Image titles, most of them music productions, including “Brian Setzer Orchestra Live in Japan,” “Barry Manilow Live” and “Christina Aguilera: My Reflection.” Bertelsmann will receive about 30 more titles over the next few months, Lee said.

Separately, the day after the Bertelsmann deal, Image announced it had signed a five-year broadcast deal with London-based NBD Television Ltd. NBD will receive the rights to distribute about 60 Image titles, mostly the same titles in the Bertelsmann deal, in addition to future releases.

Image Entertainment reported a net loss of $513,000 for the third quarter ended Sept. 30, compared with a loss of $856,000 in the like year-earlier quarter.

Third quarter revenues were $26.3 million, vs. $20.9 million.

Conor Dougherty

Jack Reports to Shareholders

At first glance, it looks like Sports Illustrated, but it’s really the annual 2002 report for San Diego-based Jack in the Box Inc.

On the front cover behind the mast a football player clutches a bacon cheeseburger as if he was going to make a rush to the end zone. Behind him is a chalkboard illustration of a play with arrows pointing to “growth!”

The inside cover ad is slugged: “got milk shake?” It features Jack dressed in a suit and tie in an office setting. A milk moustache is smeared across his ping-pong ball head.

The idea behind packaging the report like a magazine is keeping up a tradition of going for the offbeat, explained spokeswoman Karen Bachmann.

“It’s been a soft year,” she said. “The industry is in a bit of a pause now. We want to tell it like it is, but we’re also saying, ‘Look at what we’re going to do next.'”

Each year, including 1998 when the annual report came out in a comic book wrap, its format has been different. And for each of the past four years Jack in the Box has been recognized by the Public Relations Society of America as the best annual report for a large corporation.

“In that league we’re being compared to some very big companies too, like IBM,” Bachmann said. “But will we win the award again this year? Each year we ask ourselves that question and each year we are very surprised when we do.”

San Diego Business Journal

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