Fugett bows to majority shareholder

January 07, 1994|By David Conn | David Conn,Staff Writer Staff writer Ian Johnson contributed to this article

A year ago, after Baltimore native Reginald Lewis died and his half-brother, Jean S. Fugett Jr., was tapped to lead TLC Beatrice International Holdings Inc., a local politician praised Mr. Fugett's qualifications, but added a note of caution:

"If after six months or a year the company is not making progress as it should, then the shareholders I'm sure will have something to say about it," predicted state Senate President Thomas V. Mike Miller Jr.

It took exactly one year for Mr. Fugett to give up leadership of America's largest black-owned business, and shareholders did have something to say about it. They had previously moved to register the company's stock, which essentially would turn Beatrice into a public company, forcing detailed quarterly financial disclosure.

But in the end, it appears the decision to remove Mr. Fugett from his roles as chairman and chief executive officer came primarily from Loida Nicolas Lewis, Mr. Lewis's widow, and the company's major stockholder.

Mrs. Lewis, whose family controls more than 50 percent of the stock, will become chairman of the foodmaker and distributor on Feb. 1, the company said Wednesday. TLC Beatrice also said it has begun a search for a new CEO; Mr. Fugett will remain in that post until a successor is named.

"She's been a key person to the success of the company, although in the background, and I believe it's appropriate that she take the leadership," Mr. Fugett said last night in a telephone interview from Paris.

The Baltimore native -- a former tight end with the Washington Redskins and Dallas Cowboys, reporter, broadcaster and corporate lawyer -- said he is happy to remain with the company, "where I will [handle] a combination of traditional corporate issues, assisting the chairman or CEO as needed." He will remain on the board of directors.

Mr. Fugett and other Beatrice officials denied that dissatisfaction among shareholders led to this week's decision. "The company is moving forward," said James Obi, a director. "Mrs. Lewis is taking over at this time based entirely on how the program was meant to be."

But Beatrice in the past year has suffered from the recession in Europe, where most of its operations are based. In the first nine months last year, profits fell to $10.5 million from $35.7 million in 1992, a year in which earnings were depressed by a $22 million compensation package Mr. Lewis awarded himself.

With 1992 revenues of $1.6 billion, the company is a leading wholesale distributor of dry groceries, beverages and household products to supermarkets in the Paris area. It is a major manufacturer of ice cream in Europe and potato chips and snacks in Ireland.

In the last year, TLC Beatrice said it closed several plants and unprofitable operations, including ones in Spain and Puerto Rico, and reduced its work force, estimated at 5,000 in 1992, to about 4,700.

It also has faced image problems related to exorbitant executive pay and a poorly received plan to bid for the Baltimore Orioles.

At the company's annual meeting in July, Mr. Fugett received sharp questions from shareholders about the Orioles bid and news that Mr. Fugett might want to expand into other businesses.

"The stock didn't react well after the annual meeting," said Gerald B. Unterman, president of New York-based GEM Capital Management Inc. He noted that the thinly traded shares fell from the mid-60s range to the mid-40s. It now trades in the low 50s, he said.

Mr. Fugett yesterday downplayed reports of shareholder dissatisfaction with the company, saying it was "more a result of the confusion surrounding the death of my brother."

He said he told those at the annual meeting that he didn't intend for TLC Beatrice to spend $170 million for the Orioles, but that if the deal made sense it would be financed by a separate entity. "It would not have required a significant capital investment from TLC Beatrice," he explained. At the Orioles' auction in August, Mr. Fugett did not enter a bid.

Beatrice observers praised the move as a sign of renewed respect for the shareholders.

"A lot of them have been frustrated because they . . . feel this company has been run for the fun of the family, and this is the first indication" they're taking the outside shareholders' interests into account, said Margaret Schell, a fixed-income analyst and vice president at Jefferies & Co.

As for speculation that Beatrice may sell some or even all of its operations, Mr. Fugett declined to comment about any plans for the future, citing a "quiet period" in effect because of Beatrice's registration to sell $150 million in debt.

As for his future, Mr. Fugett said he still intends to spend the summer in Baltimore, "catch some O's games" and work full-time at Beatrice in New York and Europe.

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