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A trial set to start today over the sale of a juice plant may provide a peek at a notoriously private clan.
By SCOTT BARANCIK
© St. Petersburg Times, published October 29, 2001
TAMPA -- Tom Rankin and Louise Ferguson are next door neighbors near the Tampa Yacht & Country Club. Both are proud members of the Lykes family, one of the bay area's most celebrated dynasties.
But the nephew and his aunt are also combatants in a money war that, barring a last-minute settlement, will be laid bare today in a Hillsborough County courtroom.
The $103-million family feud revolves around the sale of an orange juice plant, a remnant of the once-sprawling Lykes empire. Dissenting Lykes Brothers Inc. shareholders, including former chairman Rankin, want to cash out because they say the company has become a bad investment. The current management, including Ferguson's son Howell, contend the dissenters are greedy and legally may be entitled to nothing.
It's a distasteful chapter for the genteel and private clan, most of whom have eschewed the family business for other professions and passions. "They're usually out duck hunting," said Jeff Tucker, whose Tampa public relations firm represents the dissatisfied shareholders.
Dr. Howell T. Lykes began the empire in the late 19th century when he quit medicine to ship cattle to Cuba. His seven sons all worked at the company. Over the years, the family business expanded from shipping and cattle into banking, insurance, citrus groves and meat processing. Meanwhile, the once tight-knit group of Lykes Brothers shareholders grew to nearly 240 descendants. Most today have no more connection to the company Forbes once dubbed "a fabled name in American business" than to a savings bond.
"This wasn't a chummy family working side-by-side over decades together," Tucker said. "These are third- and fourth-generation trust partners."
During the 1990s, the Lykes family sold off many of its key holdings, some of them sick businesses jettisoned at a loss, others enviable giants traded for valuable stock. Not all were units of Lykes Brothers Inc., but most shared common ownership.
The current dispute started in June 1999. The company's 16-member board of directors asked shareholders' permission to sell the company's largest remaining asset -- a troubled, 820-employee juice-processing business in Pasco County. But 26 percent abstained from the vote. Their maneuver triggered a state law that gives shareholders who oppose the sale of a key asset an option to cash out.
Not all of those wishing to cash out were arms-length shareholders. The group included former chairman Rankin, ousted two years earlier in a bitter internal battle. It also included then-board members Joseph T. "Jed" Lykes III and Douglas Maclay Sr. Leading the majority today is current chairman and chief executive Howell Ferguson, Rankin's first cousin and the son of Louise.
Since then, the two sides have engaged in an embarrassing legal battle to determine what the shares were worth before the sale, and whether the rogue stockholders were entitled to sell them in the first place. The case has generated hundreds of thousands of pages of documents, millions of dollars in attorneys' fees and a list of more than 100 potential witnesses. Each side has a publicist: Tucker Hall on one side, Hill & Knowlton on the other. The difference between winning and losing could total $103-million, or an average of more than $1-million per dissenting shareholder.
A confidentiality agreement has kept most parties mum and most documents out of reach. But a review of public records and interviews with several players offers a glimpse behind the scenes.
Lykes Brothers, for example, will try to convince chief Judge Manuel Menendez Jr. that each share of company stock is worth no more than $5,330, and that the $23,300 per share demanded by the dissenters is not only absurd but also could nearly bankrupt the company.
Lykes also will argue that Jed Lykes and Douglas Maclay put self-interest above fiduciary duty. As board members, the two voted in favor of selling the juice-processing business. Then, days before the shareholder vote, they abruptly resigned from the board, abstained from voting and demanded cash for their stock.
"(Jed Lykes and Doug Maclay) sat in on discussions for a year. They were pushing for the transaction vigorously," Ferguson said in an interview at the company's Tampa offices. "I think that to resign from the board, you know, a day before and not have told anybody that they were going to dissent raises a lot of question marks in my mind" about a possible conflict of interest.
Had the company known two of its board members would oppose the sale, it would have restructured the deal so as to avoid triggering state law, Ferguson added.
Company officials also will produce evidence they say shows Maclay, Lykes and Rankin prodded other shareholders to sell. "I've heard that some shareholders were encouraged to dissent," Ferguson testified in a deposition. "I have heard that people were told, 'This is the time to get out.' "
Privately, company officials accuse minority shareholders of using the threat of a public trial as a lever for extracting a better settlement from the historically secretive firm. Ferguson said company proposals to seek mediation or eventually buy back some shares were rejected.
Rankin, Lykes and Maclay declined to be interviewed, as did virtually all other dissenting shareholders. Ferguson and Lykes Brothers general counsel Beth Waters refused to release the three men's depositions.
But David Kerr, a former Lykes Brothers general counsel as well as a dissenter, flatly denied most of the company's allegations, calling the conspiracy theory "ludicrous." For example, he said in an interview, two of his own stepsons voted to sell their shares, but two others voted to keep them. Even one of Rankin's sisters sided with the company.
The real reason most minority shareholders decided to cash out, publicist Tucker said, was because Lykes Brothers Inc. had become a poor investment. Income and appreciation were in short supply in June 1999. Lykes Brothers' bank lenders had forbidden the company from buying back stock or paying dividends since the mid 1990s, due to the company's shaky finances, and had demanded it sell its juice-processing facility. At the same time, the stock market was skyrocketing and dot-coms were hypnotizing Wall Street.
As the trial begins, both sides express regrets. "There are people on both sides that are traumatized by this," Kerr said. "You don't want to be litigating with somebody you love."
"It's really more of a disappointment than other emotions, and frankly a puzzlement as to how this has gotten to this point," Ferguson said.
Whether aristocratic reserve survives the trial remains to be seen. Ferguson said that if Judge Menendez sides with the minority, Lykes Brothers will have to liquidate many assets. Doing so would leave the remaining family members with far less valuable stock.
"We should be building and creating value," he said, "not fragmenting and destroying it."
-- Times researchers Kitty Bennett and Cathy Wos contributed to this report. Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.