News Roundup

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The cost to companies of being public has dropped from historic levels but remains high due to skyrocketing audit fees and increased payouts to attract qualified directors, a study has found.


The law firm Foley & Lardner analyzed data from more than 850 proxy statements and found that audit fees jumped 22 percent for small-cap companies, 6 percent for mid-cap and 4 percent for large-cap firms listed in Standard & Poor’s indices.


“Corporate governance reform continues to present a more significant financial burden for small public companies than it does for larger ones,” said Tom Hartman, a Foley & Lardner partner who directed the study.


Audit fees have more than doubled in the past two years because of stiffer compliance associated with Section 404 of the Sarbanes Oxley Act of 2002. The fees average $786,000 for small companies and $1.14 million for mid-sized firms, but hit smaller firms disproportionately. Roughly one-third of companies surveyed said the costs led to budget and staff cuts.


In addition, annual directors fees have skyrocketed because of the greater liability associated with being a board member of a public company. Board pay at NYSE-listed companies averages $40,000, a 58 percent annual increase. Nasdaq-listed firms pay an average of $27,000 per director, a 71 percent increase.



Santa Monica Targets Sears Lot


The Santa Monica City Council has approved submitting a letter of intent to buy a long-sought, 2.5-acre property from Sears Holdings Corp. for $35.5 million.


For nearly three years, the city has wanted to buy the 2-acre parcel at the southeast corner of Colorado Avenue and Fourth Street for use as a potential mixed-use or transit-related site.


Jeff Mathieu, director of the city’s resource management department, told the Santa Monica Daily Press that Sears has the right to lease back the property for up to five years.


The property has been used by Sears as an auto repair site since 1953 and is across the street from its department store, which opened in 1947. The city sees the site as a potential terminus for a proposed light rail line running along Exposition Boulevard from downtown L.A.


Plans for the $505 million first phase the rail project, which will take the line to Culver City, are underway, but transportation planners are still seeking funds for a second phase that would continue to Santa Monica.



Malpractice Insurer Proxy Fight


SCPIE Holdings Inc. announced that two independent proxy advisory firms, Institutional Shareholder Services and Glass Lewis & Co., have both backed management’s slate of nominees to its board of directors, which is facing opposition from a dissident group of investors.


The Los Angeles-based medical malpractice insurer released an evaluation by ISS that stated Kaj Ahlmann, Willis T. King Jr. and Elizabeth Murphy had more insurance industry experience than a slate backed by Joseph Stilwell’s Stilwell Value LLC and other investors. Glass Lewis’ evaluation praised SCPIE’s recent turnaround, according to the release.


SCPIE has had a rocky time over the past several years after a foray into the reinsurance sector and medical markets outside of California led to successive annual losses starting in 2001.


The company reported its first annual profit $3.5 million last year, while its stock has risen over the past 12 months to close Monday at $22.09, up from $10.96 last June. However, the Stillwell group is still not satisfied with the stock price and has said the board should include individuals “who have a track record of helping troubled medical malpractice carriers focus on their core business.”



Beverage Company Splits Stock


Hansen Natural Corp. announced a 4-for-1 split of its common stock in an effort to increase the liquidity and decrease the volatility of its shares.


Corona-based Hansen has been on a tear over the past year as its Monster energy drink has quickly catapulted into the No. 2 spot in its drink category, second only to Red Bull. That has sent its stock surging to $202.10 on May 10, up from $38.03 last June. However, shares have since pulled back, to close Monday at $156.01.


Three new shares will be distributed on or after July 7 for each single share held by stock holders of record as of the close of business June 30. The company expects stocks to begin trading on a post-split basis on July 10.



Nasdaq Acquires Los Angeles Publisher


PrimeZone Media Network, a privately held Los Angeles publisher of corporate press releases, is being purchased for an undisclosed price by the Nasdaq Stock Market Inc. Nasdaq said PrimeZone’s information distribution, investor relations and multimedia services will be integrated into products offered by its corporate client group.


Funded in 1998, Prime Zone distributes information to more than 1,700 daily newspapers, 3,500 Internet sites and about 1.5 million financial desktops.



Assisted Living Service Expands


Livhome Inc., an operator of at-home assisted living services in California, Minnesota and Illinois, announced it has acquired certain assets of SeniorCare Network Inc., a provider of similar services in the San Jose area. Terms of the acquisition were not released by Livhome, which was established in 1999 and has been making a series of acquisitions to expand its geographic reach beyond Los Angeles over the past several years.



Management Firm Explores Alternatives


CorpHQ Inc. announced that it engaged Growthink Securities Inc., a Santa Monica-based investment banking firm, to “explore all strategic alternatives in order to maximize” shareholder value. The Redondo Beach firm provides money and management to early stage companies to improve their growth and profitability. The Pink Sheet stock trades at about a penny.



Broadband Comes to Satellite


El Segundo-based satellite TV provider DirecTV Group Inc. and Colorado-based rival EchoStar Communications Corp. have signed separate five-year wholesale distribution deals with broadband service provider WildBlue Communications Inc.


Greenwood Village, Colo.-based WildBlue said its satellite-based Internet service will be the only such service the companies will offer to customers for the next five years. The companies did not provide financial details.


DirecTV and EchoStar’s DISH Network subscribers will need to purchase a separate WildBlue satellite dish to receive the broadband service, though they will not need an additional phone or cable line.



Laurence Darmiento, Andy Fixmer, Kate Berry

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