Nearly a week after its chairman and chief executive committed suicide, Farmer Bros. Co.’s stock continued to rise as speculation swirled that the company could be sold.
Shares were up more than 31 percent in the four days following word of Roy E. Farmer’s death from a self-inflicted gunshot wound on Jan. 7. It closed at $29.50 a share on Jan. 13, up from its Jan. 7 close of $22.49.
“If anyone has an alternative to a sale that would have the prospect of an equivalent value, I’m sure the shareholders would be receptive,” said Gary Lutin, who runs an investor forum. “So far, neither management nor anyone else has come up with such an alternative.”
Jim Lucas, spokesman for Torrance-based Farmer Bros., declined to comment on the future direction of the coffee roaster.
It’s also unclear what will happen with the nearly 40 percent stake in the company held in a trust that was headed by Farmer, who was 52. The Employee Stock Ownership Plan, which has a provision that allows employees to determine the voting of ESOP shares, holds another 20 percent.
“Right now, there isn’t any information,” said Lucas.
Lutin has been riled by the lack of communication, along with a comment from Lucas in the Jan. 13 edition of the Daily Breeze in which he was quoted as saying a new trustee was “a private matter.” Lutin has fired off a letter to Farmer Bros. and copied the Securities and Exchange Commission.
“Investors should know who owns a third of their company’s voting stock,” the letter said. “Some delay in reporting a change is understandable under the circumstances, but I encourage you now to promptly provide the information that is needed by shareholders and required by securities regulations.”
While there aren’t any other members of the Farmer family on the company’s management team, Farmer is survived by his mother, a brother, two sisters and several nieces and nephews. The company was founded in 1912 by the Farmer family.
Guenter Berger, who had served as vice president of production for Farmer Bros. since 1990, was elected interim chief executive of the publicly held company during a special meeting held Jan. 9.
Farmer Bros. has posted 12 straight quarters of year-over-year earnings declines.
Rebecca Flass
Discounted Interest
The largest institutional shareholder in 99 Cents Only Stores Inc., mutual fund giant Fidelity Management & Research Corp., has dramatically cut its stake in the struggling discount retailer.
FMR Corp., Fidelity’s parent, reported in a filing with the Securities and Exchange Commission that its stake in 99 Cents Only had fallen to 1.2 percent, worth roughly $12 million. As recently as April 2004, Fidelity had a 12.5 percent stake (9 million shares) worth $230 million.
Shares of 99 Cents Only have fallen by half in the past year, to $14.44 on Jan. 13 from the $30 range in January 2004. The drop was sharpest in June, when the company lowered earnings guidance and disclosed problems at its main Los Angeles warehouse.
Since its last filing in November, Fidelity has sold nearly 5 million shares. The mutual fund giant reported holding 817,599 shares on Monday, down from 5.7 million in November.
Kate Berry
Deal Flow
The drive among businesses to consolidate through mergers was evident last week as a number of deals were announced or completed. They included:
– Century Park Capital Partners LP, a Los Angeles private equity firm, sold its Kids Line LLC unit, a designer and maker of infant bedding products, to Oakland, N.J.-based gift marketer Russ Berrie and Co. Inc. for $128 million. Century Park said it quadrupled its original investment of $11 million after a stock recapitalization.
– Mac-Gray Corp., the largest provider of laundry services to colleges and universities, bought Web Service Corp., a private laundry operator in Redondo Beach, for $100 million. JP Morgan Chase was the investment banker for Mac-Gray, of Cambridge, Mass.
– New York investment firm Warburg Pincus bought InfoGenesis, a Santa Barbara-based enterprise software provider to the hospitality and food service industry, for an undisclosed sum. Jay Beaghan, an investment banker at USBX in Los Angeles, represented InfoGenesis. USBX reported a record year with 12 transactions in 2004 with an aggregate value of $600 million.
– Telestat, an Ottawa satellite operator, agreed to acquire North Hollywood-based SpaceConnection Inc., a satellite programmer, for an undisclosed sum.
Kate Berry
Storage Issues
Public Storage Inc. disclosed in a filing with the Securities and Exchange Commission last week that it had been sued in federal court by two shareholders who claim the company overpaid when it bought an insurance company in 2001 from its founder B. Wayne Hughes.
Katherine Potter and Charles Krieger, company shareholders, named the Glendale-based company and members of its board in the complaint.
Potter and Krieger are seeking to force Public Storage to recover $67.5 million in profits and overpayments stemming from the purchase of PS Insurance, a reinsurer owned by Hughes that covered the contents of goods stored at temporary storage facilities.
In a related case filed in 2003 and set to go to trial in March, Hughes, the company’s chairman and former chief executive, and members of his family have asked an L.A. Superior Court judge to declare that PS Insurance was sold at a fair price.
Harvey Lenkin, president of Public Storage, would not comment on the suits other than to say “We have put into the public’s hands all of the information that we have.”
The litigation stems from a transaction that occurred when laws prohibiting real estate investment trusts from owning insurance companies were lifted in 2001.
An attorney for Potter and Krieger did not return calls.
Public Storage is evaluating the complaint and believes “that the litigation will not have any adverse effect” on the company, according to a Securities and Exchange Commission filing.
Rachel Brown
