Amid Holiday Season Frenzy, Carter Hawley Staff Ponders Sale That Could Shape Future
Even as directors of Carter Hawley Hale Stores weighed the company’s future at its Los Angeles headquarters over the weekend, the takeover bid was also getting nervous consideration from the retailer’s 56,000 employees--already besieged by the holiday crush.
“It’s Christmas, and we’re very busy, so employees just don’t have the time to realize what’s going on,” said a worker at one of the company’s Broadway stores in Orange County. “A lot of us are feeling a little bit of confusion.”
If the Carter Hawley board should endorse the merger, the takeover would be a certainty. But a decision to fight the takeover would confront thousands of workers who hold stock in Carter Hawley with potentially difficult decisions about how to vote their shares.
Since Nov. 25, when the Limited and Edward J. DeBartolo Corp. announced their intention to launch a $1.77-billion tender offer, Carter Hawley has played it very low-key, employees say. To date, the only official word from Chairman Philip M. Hawley has been a letter dated Nov. 28 that was distributed to all workers:
“Once again, we are called upon to maintain our steady upward course in the progress of our business while an attempt is made to acquire control of our company,” Hawley wrote. “I cannot overemphasize to you the importance of focusing our efforts on this crucial selling season--our strength rests on those results.
“The board of directors will give appropriate consideration to all elements of our situation before eciding upon a course of action, and you will be fully advised of any recommendation from our board.
“On a personal note,” Hawley concluded, “I am grateful for the loyalty and dedication which have always been shared between us. I pledge my fidelity to that trust.”
Carter Hawley’s board met both Saturday and Sunday without announcing a decision. Under securities laws, they are obligated to respond by Friday. One factor being taken into consideration is that, if a deal is completed by year-end, shareholders would benefit from more favorable tax treatment.
Looked Like Business as Usual
Meantime, it looked like business as usual late last week at the Broadway Plaza store, even though workers occasionally stole moments to discuss developments in the takeover effort. They are well aware of how crucial this holiday season is for the Broadway and other Carter Hawley divisions.
The parent company has only recently gotten back into Wall Street’s good graces after years of lackluster performance and is banking on strong improvements in sales and profits for 1986 to keep its momentum.
Ironically, the company’s standing has improved largely because of dramatic changes begun in 1984 to thwart the Limited’s first takeover effort. Since then, Carter Hawley has divested itself of some underperforming assets and improved on some of its strengths--notably Neiman-Marcus, its Dallas-based specialty chain.
It also has instituted a commission system for most sales associates that was designed to improve customer service but has met with less than resounding approval by many employees, particularly those veterans who resent younger, more aggressive employees.
Change in Trust Plan
During the bitter takeover contest 2 1/2 years ago, Carter Hawley’s employee stock plans--which then as now controlled about 20% of the voting power--became a subject of controversy. Ultimately, the employees stood firmly behind management in thwarting the Limited’s $35-a-share bid.
Now those employees face the temptation of a much sweeter price--$55 a share.
Several employees have already looked into selling their shares as the stock price has risen in recent days, according to sources inside the company. However, many were caught unawares by a change in the trust agreement governing the stock plans that is another legacy of the 1984 victory over the Limited.
That change--designed to ensure that the plans would not run out of cash--prevents workers from trading in their shares for cash in the event of a tender offer. Instead, those employees apply to receive stock certificates that would then be sold through a broker. According to information supplied by the company, the process takes six to eight weeks.
Profit taking aside, the question remains of what life would be like for Carter Hawley employees under a new regime.
Concerned and Nervous
“I think most (Carter Hawley) employees are fairly loyal and would be very concerned and nervous about anybody--good or bad--trying to take over their company,” said Allen I. Questrom, chairman of Bullock’s, a rival department store chain. “The sense is that the divisions would be broken up and that employees would see very few benefits.”
In documents filed with the Securities and Exchange Commission, the Limited-DeBartolo venture, known as Retail Partners, indicated that the Limited would buy for itself Carter Hawley’s three specialty divisions and that developer DeBartolo would purchase Thalhimers, a department store unit based in Virginia.
Beyond that, the company would be kept whole, Limited Chairman Leslie H. Wexner said in an interview Friday.
However, Wexner’s experience to date has been limited to specialty stores. Would Carter Hawley’s department store employees be in for a shake-up?
‘Builders and Growers’
“We never have acquired or started or merged a business with ours for the purpose of taking it apart or selling it,” Wexner said. “We’re builders and growers. . . . We would have clearly as our objective to grow every part of the business and to grow it with the associates of the company.”
In the past, Wexner installed new management to turn around troubled acquisitions--particularly Lane Bryant and Lerner Stores. After the purchase of Lerner, where Wexner inherited massive inventory foulups that he contends were the result of chaotic bookkeeping, reports of mass firings followed. Said Wexner: “The fact is that a lot of people quit; they were doing a very bad job. It was the day before we showed up that they decided to leave because they were doing poor jobs and not being fair to their company.”
