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Lykes face off, lay out arguments in court
By SCOTT BARANCIK
© St. Petersburg Times, TAMPA -- As former Lykes Brothers Inc. chairman Tom Rankin strode toward Courtroom No. 1 on Monday, he smiled and shook hands with first cousin and current chairman Howell Ferguson. And kept on walking. It was that kind of afternoon at the Hillsborough County courthouse, day one of an expected two-month trial between two warring factions of the Lykes family. Lawyers from both sides traded caustic jokes. Opposing family members greeted one another cordially but sat in opposite corners of the room. But the battle was joined. At issue: the value of a share of Lykes Brothers stock. When the Tampa company decided in 1999 to sell its key asset, a Dade City juice-processing unit, the move triggered a state law that lets those opposed to such a sale cash in their shares. Eighty-one family members holding 26 percent of Lykes' stock asked for cash. They think they are entitled to $23,700 per share; Lykes says they are entitled to $5,330, at best. In opening statements Monday, lawyers for both sides briefed Chief Judge Manuel Menendez Jr. on their arguments. Joe Varner, one of several Holland & Knight attorneys representing the 81 dissenters, said he will prove Lykes' valuation process was flawed. For example: The company Lykes hired to determine the value of its shares initially pegged its citrus groves and juice-processing unit at $260-million to $297-million. But after an eight-hour meeting with Lykes representatives, Nesbitt Burns slashed its estimate to a range of $161-million to $179-million. Nesbitt significantly underestimated the value of Lykes' vast land holdings in Florida and Texas. The dissenting shareholders' experts said the land is worth well over $400-million. In 1999, Howell Ferguson allegedly told Tom Rankin that Lykes' first offer was a "low ball" and that he expected Rankin to counter with an unreasonably high demand. The two sides would then come out somewhere in between. Varner scoffed at Lykes' claim that it would have restructured the juice sale or scuttled the deal had it known so many shareholders would dissent. He said Lykes knew at least one day in advance but went ahead with the deal anyway. Ben Hill, a Hill Ward & Henderson attorney representing Lykes Brothers, called the dissenters' $23,700-per-share estimate outrageous: The figure is almost three times as much as the highest price paid for a share of Lykes Brothers stock. Sixteen dissenting shareholders were among those who purchased shares from a family member in 1997 for $6,790. It wouldn't be fair to ask the non-dissenting shareholders to buy those back for almost four times as much money. The dissenters' valuation experts paid no attention to the fact that Lykes Brothers was losing about $1-million per week at the time of the sale in 1999. At $23,700 per share, Lykes Brothers' price-to-earning ratio would be about 24. The ratio for a similar, publicly-traded company, Alico Inc., is about 8. A discount of 30 percent should be applied to the per-share price because there is an extremely limited market for Lykes Brothers shares. In fact, every share purchase since 1986 has applied such a discount. Both parties will also argue a more fundamental question: whether the dissenting shareholders are entitled to sell their shares at all. The answer will depend on whether the judge agrees that the sale of the juice business, as the dissenters say, deprived the company of its chief asset and fundamentally changed its nature. Lykes argues that the company is and always has been an agri-business company. Lykes will muster its case first. This week, it will call on five witnesses, including former chairman and current board member John Brabson Jr., local lawyer (and Ferguson's sister) Stella Thayer, former outside director William Pietersen, chief financial officer Susan Casper and former chief executive Lenny Pippin. -- Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.
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From the Times Business report
From the AP
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