Public trade of Beatrice stock sought Losses, CEO's pay prompt request for SEC disclosure

September 22, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Frustrated by financial losses and payment of more than $30 million to a CEO, stockholders of TLC Beatrice International Holdings Inc. are trying to force the company to trade its stock publicly.

The shareholders, who own 25 percent of the food company's stock, formally asked New York-based TLC Beatrice, America's largest black-owned business, on Friday to register the stock with the Securities and Exchange Commission. Under a shareholders' agreement, the company has 120 days to make "every effort" to list the stock.

If successful, the move would be a posthumous blow to Baltimore-born Reginald F. Lewis, the nationally known chief executive officer of TLC Beatrice who died in January. Mr. Lewis, who owned the $1.6 billion company, had fiercely guarded his company's secrecy -- and the perks he enjoyed as TLC Beatrice's unchallenged boss.

Those perks culminated last year in a compensation package the company valued at $22 million, which helped drive TLC Beatrice into the red and outraged many stockholders.

In addition, Mr. Lewis picked up an additional $10 million in advisory fees that he paid to himself and from a company buy-back of stock that he authorized, according to recently filed SEC documents.

Mr. Lewis died of brain cancer shortly after awarding himself the money, and his shares are held by his family.

Another concern that led to the shareholders' action was recent interest by the Lewis family in buying the Baltimore Orioles baseball club, which was sold in August for $173 million. Some investors were appalled at the idea of a money-losing food company taking on the distractions of owning a major league team.

"They shouldn't be allowed to do this with the company," said Dave Sadork of Jeffries & Co. Inc. in Los Angeles. "This is why they should be forced to register with the SEC. It would makes things more open."

An SEC registration would not strip the Lewis family of ownership, but would require it to file regular financial statements with the commission. In addition, the 25 percent of stock not held by the company could be publicly traded on the stock market, allowing investors a chance to buy and sell the stock.

Currently, the stock is traded only privately, and the company is not bound to release its financial figures publicly. This year it stopped publishing the figures after falling victim to the recession in Europe. Company officials refused comment on the shareholders' action.

TLC Beatrice is currently run by Mr. Lewis' half-brother Jean S.Fugett Jr., a 41-year-old former Baltimore lawyer and Washington Redkins tight end. He receives a $350,000 annual salary and a guaranteed minimum bonus of $150,000.

The salary figures and the details of the company's recent fall into the red were filed with the SEC by TLC Beatrice last week as part of its plan to issue $150 million in bonds. The 10-year bonds will pay off high-interest junk bonds issued to pay for the company's purchase.

The SEC figures show that the company would have made a profit in 1992 had Mr. Lewis' compensation not been so high.

Even that profit, however, would have been small, as the company's sales suffered through the European recession.

Mr. Lewis' company once included food processing and retail operations in Asia, but he was forced to sell those off to help pay for the $1 billion leveraged buyout, which he financed with money raised by junk bond king Michael Milken. With all its eggs in Europe and still in debt from the leveraged buyout, TLC Beatrice had to make interest payments of $37 million last year.

TLC Beatrice makes snacks and ice cream products that it wholesales across Europe. It also runs the largest grocery chain in the Paris area.

While potentially lucrative, TLC is a small player in a highly competitive industry, food analysts say. Hobbled by its debt, it could not move as quickly as possible to open discount stores, which are catching on in Europe. Instead, the company opened five small grocery stores last year, the filings show.

While the snack business increased last year by 2 percent, the retailing dropped 27 percent, according to the SEC filing. The figures are in local currency and were less drastic when converted into U.S. dollars.

Still, TLC Beatrice laid off at least 300 employees and closed two factories in Europe last year.

The bad numbers were reflected in the company's bottom line. Last year, it lost $16.5 million. For the first six months of this year, unaudited figures show the company made $3.4 million, an $11 million decrease over the same period in 1992.

The figures provide a rare glimpse into a company that Mr. Lewis did not eagerly open to public scrutiny. He shunned most press interviews and clashed repeatedly with Wall Street over investors' desire for him to loosen his reins at the company

and not pay himself so much for his work.

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