“The
law in these circumstances couldn’t be clearer.
Once
a company or individual owns six percent of the target company, they must
declare their position to the Securities and Exchange Commission in Washington,
D.c
.
, and state within
twenty-eight calendar days if it is their intention to make a takeover bid for
the rest of the shares. And if so, what price they are willing to offer.”
“If
someone is trying to take us over,” said Tom, “they won’t wait the statutory
month.
Once
they’ve hit six percent they’ll make a bid the same day.”
“I
agree, Mr. Chairman,” said Nat, “but until then, there is nothing to stop us
buying our own shares, although they are priced a little on the high side at
the moment.”
“But
won’t that alert the opposition to the fact that we know what they’re up to?”
asked Julia.
“Possibly,
so we must instruct our brokers to buy soft, and that way we’ll quickly find
out if there’s one big purchaser in the market.”
“How
much stock do we own between us?” asked
Julia.
“Tom
and I each hold ten percent,” said Nat, “and you are currently holding,” he checked
some figures in a second file, “just over three percent.”
“And
how much cash do I still have on deposit?”
Nat
turned the page, “Just over eight million dollars, not to mention your Trump
shares, which you’ve been liquidating whenever there’s a strong demand.”
“Then
why don’t I pick up any soft shares, which wouldn’t be quite so easy for any
predators to trace?”
“Especially
if you only dealt through Joe Stein in New York,” said Tom, “and then ask him
to let us know if his brokers can identify any particular individual or company
who’s buying aggressively.” Julia began taking notes.
“The
next thing we have to do is select the sharpest takeover lawyer in the
business,” said Nat.
“I’ve
talked to Jimmy Gates, who’s represented us in all our previous takeover bids,
but he says this one is out of his league, and recommends a guy from New York
called,” he checked the third file, “Logan Fitzgerald, who specializes in
corporate raids. I thought I’d travel up to New York before the weekend and
find out if he’ll represent us.”
“Good,”
said Tom, “anything else we ought to be doing in the meantime?”
“Yes,
keep your eyes and ears open, chairman. I need to find out as quickly as
possible who it is we’re up against.”
“I’m
very sorry to hear that,” said Fletcher.
“It’s
nobody’s fault,” said Jimmy, “and I can’t pretend it’s been going well for some
time, so when UCLA invited Joanna to head up their history department, it just
brought matters to a head.”
“How
are the children taking it?”
“Elizabeth’s
just fine, and now that Harry Junior’s at Hotchkiss, they both seem grown up
enough to handle the situation. In fact, Harry rather likes the idea of
spending his summer vacations in California.”
“I
am sorry,” repeated Fletcher.
“I
think you’ll find it’s the norm nowadays,” said Jimmy. “It won’t be long before
you and Annie are in the minority. The principal told me that around thirty
percent of the children at Hotchkiss come from broken homes. Do you know when
we were there, I can’t remember more than one, perhaps two, of our contemporaries
whose parents were divorced.” He paused. “And the good thing is
,
if the children are in California during the summer, I’ll
have more time to spend on your reelection campaign.”
“I’d
rather you and Joanna
were
still together,” said
Fletcher.
“Any
idea who you’ll be up against?” asked Jimmy, obviously wanting to change the
subject.
“No,”
said Fletcher, “I hear Barbara Hunter is desperate to run yet again, but the
Republicans don’t seem to want her as their candidate if they can find a
half-decent alternative.”
“There
was a rumor circulating,” said Jimmy, “that Ralph Elliot was considering
running, but frankly after your Billy Bates triumph, I don’t think the
Archangel Gabriel could unseat you.”
“Billy
Bates was not a triumph, Jimmy.
That
man’s death haunts me even now. He could still be alive today if I’d only been
firmer with Chief Culver.”
“I
know that’s how you see it, Fletcher, but the public feels otherwise. Your
reelection last time proved that. All they remember is that you risked your
life to save thirty-one children and their favorite teacher. Dad says if you
had run for president that week you’d be living in the White House right now.”
“How
is the old buzzard?” asked Fletcher.
“I’m
feeling a bit guilty because I haven’t had a chance to visit him recently.”
“He’s
fine, likes to believe he’s still running everything and everybody, even if
he’s only planning your career.”
“What
year has he got me running for president?” asked Fletcher with a grin.
“That
all depends on whether you’re first considering running for governor. By the
time you’ve done four terms as senator, Jim
Lewsam
will just about have completed his second term.”
“Perhaps
I don’t want to be governor.”
“Perhaps
the pope isn’t a Catholic.”
“Good
morning,” said Logan Fitzgerald as he looked around the boardroom table.
“Before you ask,” he continued, “the answer is Fairchild’s.”
“Of
course,” said Nat. “Damn it, I should have worked it out for myself. When you
think about it, they are the obvious predator. Fairchild’s is the largest bank
in the state; seventy-one branches with almost no serious rivals.”
“Someone
on their board obviously considers we are a serious I rival,” said Tom.
“So
they’ve decided to eliminate you before you think of doing the same thing to
them,” said Logan.
“I
can’t blame them,” said Nat, “it’s exactly what I’d do if I were in their
position.”
“And
I can also tell you that the original idea didn’t come from a member of their
board,” continued Logan. “The official notification to the SEC was signed on
their behalf by
Belman
Wayland and Elliot, and there
are no prizes for guessing which of the three partners’ signature appears on
the dotted line.”
“That
means we’ve got one hell of a fight on our hands,” said Tom.
“True,”
said Logan, “so the first thing we have to do is start playing the counting
game.” He turned his attention to Julia. “How many shares have you picked up in
the last few days?”
“Less
than one percent,” she replied, “because someone out there keeps pushing the
price up. When I asked my broker yesterday evening, he told me at close of
business the shares had touched $5.20.”
“That’s
way above their realistic value,” said Nat, “but there’s no way back for either
of us now.
I’ve
asked Logan to join us this morning so he can give us his assessment of our
chances of survival, as well as take us through what’s likely to happen during
the next few weeks.”
“Let
me bring you up to date as of nine o’clock this morning, Mr. Chairman,”
continued Logan.
“In
order to avoid a takeover, Russell’s must have in their possession, or pledged
to them in writing, fifty point one percent of the bank’s shares. The board
currently holds just over twenty-four percent, and we know Fairchild’s already
has at least six percent. On the face of it, that looks satisfactory. However,
as Fairchild’s are now offering $5.10 a share for a period of twenty-one days,
I feel it’s my duty to point out that should you decide to sell your shares,
the cash value alone would net you in the region of twenty million dollars.”
“We’ve
already made our decision on that,” said Tom firmly.
“Fine,
then
you’re
left with only two choices.
You
can either make a higher offer than Fairchild’s $5.10 a share, remembering your
chief executive’s judgment that they are already way above their realistic
value, or you can contact all your shareholders, asking them to pledge their
stock to you.”
“The
latter,” said Nat, without hesitation.
“As
I anticipated that would be your response, Mr. Cartwright, I’ve studied the
list of stockholders carefully-as of this morning,
there
were 27,412 in all, mostly holding small amounts, a thousand or less shares.
However, five percent remains in the portfolios of three individuals, two
widows residing in Florida who own two percent each, and Senator Harry Gates,
who is in possession of one percent.”
“How’s
that possible?” asked Tom. “Harry Gates is known to have spent his entire
public life living on a senator’s salary.”
“He
has his father to thank for that,” said Logan.
“It
seems that he was a friend of the founder of the bank, who offered him one
percent of the company in 1892.
He
purchased one hundred shares for one hundred dollars, and the Gates family has
held on to them ever since.”
“What
are they worth now?” asked Tom.
Nat
tapped his calculator. “Close to half a million, and he probably doesn’t even
realize it.”
“Jimmy
Gates, his son, is an old friend of mine,” said Logan, “in fact I owe my
present job to him. And I can tell you that once Jimmy finds out that Ralph
Elliot is involved, those shares will immediately be pledged to us. If you can
lay your hands on them, and reel in the two old ladies from Florida, you’ll be
close to controlling thirty percent, which still means you’ll need another
twenty point one percent before anyone can relax.”
“But
from my experience of past takeovers, at least five percent won’t get back in
touch with either of us,” said Nat, “when you consider changes of address,
trust funds, and even those like Harry Gates who don’t bother to check their
portfolios from year to year.”
“I
agree,”
said
Logan, “but I won’t rest easy until I
know you control over fifty percent.”
“So
how do we go about getting our hands on that extra twenty percent?” asked
Tom.
“Damned
hard work, and hours of it,” said Logan. “To start with, you will have to send
out a personal letter to all your shareholders, just over twenty-seven thousand
in all. This is the sort of thing I have in mind.” Logan handed copies of a
letter to each of the board members. “You’ll see that I’ve concentrated on the
bank’s strengths, long history in the community,
highest
growth of any financial institution in the state. I’ve asked if they want one
bank to end up with a monopoly.”
“Yes,”
said Nat. “Ours.”
“But
not yet,” said Logan. “Now, before we agree on this letter, I’d welcome your
input, as it has to be signed by your chairman or chief executive.”
“But
that’s over twenty-seven thousand signatures?”
“Yes,
but you can split them between you,” said Logan with a smile. I wouldn’t
suggest such a Herculean task if I wasn’t fairly sure our rivals will send out
a circular headed “Dear Shareholder” with a stylized signature above the name
of their chairman. The personal touch might well make the difference between survival
and extinction.”
“Can
I help in any way?” asked Julia.
“You
certainly can, Mrs. Russell,” replied Logan. “I’ve designed a totally different
letter for you to sign that should be sent to every female shareholder.
Most
of them are either divorced or widowed and probably don’t check their
portfolios from one year to the next. There are nearly four thousand such
investors, so that should take care of your weekend.”
He
pushed a second letter across the table. “You’ll see I’ve referred to your
particular expertise in having run your own company, as well as being a board
member of Russell’s for the past seven years.”
“Anything
else?” asked Julia.
“Yes,”
said Logan, passing her two more sheets of paper. “I want you to visit the two
widows from Florida.”
“I
could go early next week,” said Julia, checking her diary.
“No,”
said Logan firmly. “Phone them this morning and fly down to see them tomorrow.
You can be sure that Ralph Elliot has already paid them a visit.”
Julia
nodded, and began checking through the file to find how much was known of Mrs.
Bloom and Mrs.
Hargaten
.
“And
finally, Nat,” continued Logan, “you’re going to have to get yourself involved
in a fairly aggressive media campaign; in other words, let it all hang out.”
“What
do you have in mind?” asked Nat.
“Local
boy made good, Vietnam hero, Harvard scholar who returned to Hartford to build
up the bank with his closest friend. Even throw in your cross-country
experience-the nation is going through a bout of jogging mania at the
moment-and one or two of them might even be shareholders. And if anyone wants
to interview you from Cycling News to Knitting Weekly, just say yes.”