S.D.-Based Private Ledger Put Up for Sale
Crown Life Insurance of Canada said Thursday that it plans to sell its San Diego-based Private Ledger Financial Services subsidiary, one of the nation’s largest networks of independent stockbrokers, with 352 branch offices in 45 states.
Crown acquired Private Ledger in 1984 from Del Mar-based American Principals Holdings Inc., a now-defunct investment firm, shortly after APHI was taken over by a court-ordered receiver at the request of the Securities and Exchange Commission. According to SEC court filings, APHI officials unlawfully commingled investor funds.
Private Ledger, whose brokers sold some APHI-organized limited-partnership investments, was drawn into a class-action investor lawsuit brought against APHI and several of its advisers. The suit alleged that APHI bilked investors out of more than $40 million. Private Ledger last year settled its share of the claims for $1 million, Crown Vice President Jeff Feeney said.
APHI Chairman Carl Zimmerman was indicted by a federal grand jury in January on 51 counts of mail fraud. He has pleaded innocent to the charges.
Asking Price Not Disclosed
Toronto-based Crown would not disclose the asking price for Private Ledger but said that Crown wanted to at least recoup its $10-million investment in the securities firm. Feeney said Crown hoped to complete a sale in three to six months.
In a letter to Private Ledger representatives last month, President Phillips Montross hinted that Private Ledger executives may try to mount an management buy-out of the firm. Montross was unavailable for comment Thursday.
Founded in 1972, Private Ledger is a network of about 700 independent contractor brokers who pay Private Ledger a monthly fee for due diligence, stock trade clearance and marketing.
Despite legal problems, Feeney said that Private Ledger has been profitable each year since its acquisition, except in 1985. Private Ledger reported pre-tax income of $1.6 million on $42.8 million in revenue for 1987.
“Why are we selling if Private Ledger is profitable and after we’ve come through a messy period?” Feeney said. “We decided long-term that we want to focus on Crown’s core life and health insurance products.”
Feeney said Crown is redirecting its capital mainly to its health insurance business, an area where many underwriters, including Crown, have suffered losses in recent years. The sale of Private Ledger is being handled through investment banker F.M. Roberts & Co. of Los Angeles.
Crown loaned APHI $9 million in 1982, a loan which gave Crown the option of acquiring Private Ledger. Crown exercised the option in 1984, converting the $9-million loan and $1 million in accrued interest to 100% stock ownership, Feeney said.
Founded in 1900, Crown Life currently manages about $6.8 billion in assets. Crown’s net income for 1987 was $12 million on revenue of $2.8 billion.
