As you must be aware, the terms of this privatization deal call for a Russian investment firm (Joint Stock Company Open Investments) to purchase all Class A shares at $4.25 per share. Meanwhile, the Class B shares (multiple voting shares) most of which are owned by company founder Gaylord Lindal (he owns 3.65 million shares) will not be sold, rather the Class B shareholders will continue to have a stake in the company. The first question that comes to my mind is, why aren't the Class B shareholders selling?
I had the chance to call up Bill Simpson, Viceroy Homes VP Finance and spoke with him about why the Class B shareholders, namely Christopher and Gaylord Lindal were not selling their shares, if in fact the Russian takeover offer was good.
Bill Simpson replied a that the Lindal family was continuing to hold onto their shares for sentimental reason. Since Gaylord had founded the company over 50 years ago, he didn't feel right just selling his stake. --A weak argument at best--
I didn't buy this sentimental argument at all. I replied to him, "It's every entrepreneurs dream to start a company from scratch, just like Gaylord did, and build it into an empire just like Gaylord did." -- Clearly I'm embellishing Gaylord's accomplishments, but given the utter preposterousness of the whole deal, the hint of sarcasm did not seem out of place. --
I continued, " And then after years of hard work, Gaylord should be more than happy to sell his shares at $4.25, sell the company, thereby reaping a financial windfall. All his years of work and now he could sell to the Russians for millions. But why then does Gaylord not want to sell?"
Bill Simpson stops talking about the sentimental drivel, and brings up another reason. " Well, in fact, the family will be staying to provide their expertise, since they have over 50 years experience. They will help the Russians..."
So there you have it, apparently Gaylord and Christopher Lindal will continue to hold onto their Class B shares in order to provide their experience and expertise to the Russians.
In case you may not be aware, Gaylord Lindal is over 80 years old. I saw him speaking at the Annual shareholder meeting just a few months ago. He is frail, slow and on a few instances, a bit incoherent. I'm sure he's a nice guy, he actually seemed charming, and I'm sure he knows a lot about the manufactured housing industry, but clearly his best days have past. To think that he will be central to instructing the Russians on how to construct homes in Russia, or that he will be traveling to Russia on business trips is absolutely ridiculous.
Then we have Christopher Lindal, the founders son. There had been some speculation that he was going to be the successor to the Viceroy Homes throne... walking in his father's footsteps, could he have been a future CEO? Well now that the Russians might be taking over, it looks like Christopher will have to remain in the backseat. But could the Russians use his experience? Surely Christopher Lindal might want to hold onto his shares and provide ongoing expertise and guidance to the new Russian owners.
Well, in fact given his track record, I wouldn't even trust Christopher to guide lawnmower!! Christopher was the guiding force behind Viceroy's botched entry into the Japanese market. Almost a decade was wasted trying to build the Japanese business, and now it has all but dissolved into nothing.
Meanwhile, as Christoper was busy in the "land of the rising sun" business in Canada was suffering. Viceroy completely missed the boat on the whole oil induced expansion in Alberta.
And the housing boom in the United States? Yes, neither Gaylord or Christopher were able to spot it, and Viceroy never really capitalized on the opportunity.
So, do you think the Russians really need the Lindal family expertise to guide them? Not at all.
You know the real reason the Lindal's are holding onto their Class B shares. It's all about money. After the Russians buy out the Class A shares, they can easily make a great offer to buy out the Class B shares for maybe $8 to $10.