Mr. Sigoloff Gets the Message From Irate Investor
In this corner, the heavyweight of business turnarounds, Sanford C. Sigoloff, chief executive of Wickes Cos. In the other corner, battling Jeffrey Kahn, gadfly-weight Wickes stockholder.
Pen pals whose relationship went sour, they have become unlikely antagonists.
Sandy Sigoloff, 57, a former scientist, is renowned as a savior of tottering businesses, including Wickes, which he shepherded through Chapter 11 bankruptcy proceedings three years ago. Sigoloff, who doesn’t mind that people have dubbed him “Ming the Merciless,” is familiar to television viewers as the star of commercials for Builders Emporium, a Wickes division. (“We got the message, Mr. Sigoloff.”)
Kahn, 43, is a lawyer, a certified public accountant, a one-time IRS audit field agent and former audit division chief for the Nevada Gaming Control Board. He also boasts turnaround efforts, though less grand, while an executive at the Sahara hotel-casino in Las Vegas and more recently at the Valley Hilton Hotel in Encino. He presently is chief financial officer at the Malibu Riding & Tennis Club. Probably no television viewers would recognize him.
What’s his beef?
Kahn says he was so impressed by Sigoloff’s reputation that he plunged a $185,000 nest egg into Wickes stock, only to see his 8,000 shares waste away to half their value last year.
Kahn is not your typical investor, and he has waged a lively and curious correspondence with Sigoloff since seeking him out last year as a potential mentor and employer. Throughout the exchange of letters, Kahn has been liberal with advice and criticism on running the $4-billion-a-year automotive and retailing enterprise.
But now Kahn has gone public--even to the point of advertising for fellow shareholders aggrieved about how poorly their investment is faring while Wickes is undergoing a slow process of reshaping.
For Sigoloff, who has pulled down more than $1.8 million in yearly salary and bonuses at Wickes for his expertise, the experience with Kahn obviously has become distasteful.
While admitting his own frustration that Wickes’ stock price has failed to bounce back since its “free fall” after the Oct. 19 market crash, Sigoloff answered some questions about Kahn recently, then told the interviewer: “I’m being very generous by even responding on the subject.” During his correspondence with Kahn, Sigoloff had written some friendly, chatty responses, even in the face of the criticisms. Although Sigoloff had alluded cheerily to Kahn’s persistence, that quality proved too much of a good thing.
Performance ‘Disastrous’
Perhaps the final straw was Kahn’s unusual step last month of placing an ad in the Wall Street Journal seeking out persons who share his disappointment in Wickes. Kahn then proceeded to inform Sigoloff that the response to the ad was overwhelming and that Kahn favored a change in control or a sale of the company as the next course of action.
“Dear Jeffrey” quickly became “Dear Mr. Kahn,” as the Wickes chief turned down the cordiality.
Copies of the “Kahn-Sigoloff Papers” provided by Kahn show that as long ago as last April--long before the stock market crash--he was harping on what he called the “disastrous” performance of Wickes stock. Management apparently had “lost credibility with the investment community,” he added.
That letter also warned that the company’s proposed 1-for-5 reverse stock split was “ill advised” and would invite a further drop in the stock’s price.
Didn’t Hesitate
(The split was approved at the June, 1987, annual meeting, followed by an initial trading price of $21.50, which fell to $7.25 in the October crash. It was trading below $10 until this month, when it rode up to as high as $11.50, before dipping again.)
Despite the grimness of his letter last April, Kahn added a postscript renewing a dinner invitation to Sigoloff and his wife.
Although Wickes management has come to consider Kahn as persona non grata, a Sigoloff lieutenant last Sept. 8 thanked Kahn in writing for “your most recent note” and told him not to “worry about being ‘pesty’ ” in seeking employment and adding, “Don’t hesitate in sending us notes from time to time.”
Indeed, he didn’t hesitate at all.
His views of perceived shortcomings at Wickes were extensively ventilated in a three-page letter last Feb. 6, saying in part:
“During the past year, the stock market has reacted in a severe negative manner toward the company,” resulting in stock decreases that “significantly exceeded those of the major averages and also were among the worst performances on either the New York or the American stock exchanges during that period.”
Kahn said the poor stock performance was attributable to many factors, which he proceeded to list at great length.
Heading the list was a “lack of credibility of the company’s acquisition and disposition program as perceived by the market.” He also cited “failure to always or timely complete contemplated announced significant actions,” exemplified by the failure to complete an announced sale of Wickes Lumber to its management last fall.
The letter cited various steps that “could be taken immediately” to increase the market price of Wickes stock, including selling, merging or liquidating the company.
“As a concerned stockholder,” Kahn wrote, he wanted to meet with Sigoloff, and he set a deadline of 5 p.m. Dec. 19 to receive a response. Otherwise, Kahn said, he would “then re-evaluate my options and either act unilaterally or begin an effort to solicit the support of other shareholders . . . “
Considering the tone, Sigoloff’s response of Feb. 12 in a “Dear Jeffrey” letter seemed sweet reason itself. In part, it said: “Your letter is obviously a very thoughtful one that deserves a serious response.”
It went on to say that “one can quibble with” whether each factor cited by Kahn contributed to the company’s current stock price, but that “we share your frustration as to where the stock is currently trading.”
Noting that the management and board have spent an “enormous” amount of time evaluating different strategy alternatives intended to “enhance stockholder values,” Sigoloff went on to write:
“Wickes has never been promoted by this management as a stock which would provide instant appreciation for our stockholders.
“Our program from the completion of the Chapter 11 days has consistently been to redirect the company both through acquisitions and through improvement of our remaining core businesses, so that over time the Chapter 11 indebtedness could be repaid and our stockholders rewarded by a company whose business es offered both earnings stability and growth potential.”
Sigoloff went on to note that Wickes has sold numerous companies which provided “unacceptable” rates of return or growth potential, rebuilt three remaining core businesses from “old Wickes” and made three “exceptional” acquisitions, as well as paying down $500 million of the long-term debt within a year.
‘Barrage’ of Calls
He added, most politely, that all stockholders, including Kahn, are free to evaluate their options and to hold their stock, sell it or take some of the other actions that Kahn suggested.
In a postscript, Sigoloff concluded: “On a personal note, I hope your job-hunting efforts are going well. I know that you have great persistence and capabilities and I am sure that you will find a career slot which will prove rewarding for you.”
On March 11, Kahn wrote Sigoloff again, noting that “as you may be aware,” he had run an ad March 7 in the Wall Street Journal that was “targeted to disappointed Wickes shareholders.”
“The response to that ad far exceeded my expectations,” Kahn wrote.
(In an interview, Kahn elaborated that he got a “barrage” of calls from kindred spirits, starting at 7:30 a.m. and going until almost 11 p.m., first locally and then across the country. On ensuing days, he said, a flock of letters came in from around the country. Among those who called, he said, was a broker “who said he represented 400,000 shares” of Wickes.)
In a reply Sigoloff told Kahn brusquely:
“For over a year now, I have responded to a series of letters in which you have attempted to become involved in the management of Wickes’ businesses. On several occasions you have requested employment and otherwise offered your services to the company
“Over this time period, the tone of your letters has changed dramatically--from one being exceedingly laudatory of this management and its accomplishments to your current posture of one in which you wish to ‘effectuate a change in control or sale of the company.’
“The Wickes management team, both corporate and operating, intends to continue its efforts in building the company for the benefit of all shareholders. Since your motive appears to be counter to that objective, no useful purpose would be served by meeting to discuss your personal aspirations.”
‘Positive Confirmation’
On March 20, Kahn sent off a finale, saying he felt a “necessity to clear the air regarding the cycle of my motivations and my intentions.”
“I initially bought and subsequently continued buying Wickes stock because of my gut belief in you,” Kahn wrote. “I believed in headlines such as ‘Sandy Sigoloff and the Miracle of Wickes’ and ‘Sanford Sigoloff--Man with a $1.4-Billion Message’ and ‘Wickes’ Sanford Sigoloff Is Out to Prove He Can Build as Well as Repair Firms.’
“Then I met you and heard you speak. Positive confirmation. As I became more interested and financially committed, I developed a high degree of respect for you.”
At another point, Kahn wrote: “Yes, I wanted to work for you, with you. What aggressive, ambitious executive wouldn’t?” Yes, the letter said, the tone of his letters had changed: ‘I had unsuccessfully invested more than I should have in one company over which I had no control or influence (acknowledged bad judgment on my part). I saw the price of the stock fall to a level lower than its price had been on emergence from bankruptcy.”
As for his personal aspirations, Kahn said that, in relation to Wickes, it is to see a high level of success that is reflected in the price of its stock, “a true benefit for all shareholders.”
“I don’t like losing, in life, business or investing,” the letter said. “In my new and truly unfortunate role, indications are that I have become a ‘ticking time bomb.’ It is a new, expanding and evolving role for me and obviously I don’t know what the outcome will be. The choices seem to be a legitimate explosion on behalf of the shareholders of the company or deactivation as a result of your accomplishments.”
The “ticking time bomb” was an allusion to Sigoloff’s well-publicized way of referring to major problems inside the company.
In an interview Sigoloff did not display concern so much as a mild annoyance when asked about Kahn. He said that Wickes is doing fine with its complex restructuring and, meanwhile, all the company can offer investors is “long-term appreciation” of value.
Shrugging, Sigoloff said he himself has a lost a lot more money on Wickes stock than Kahn has, but that the stockholder is entitled to do what he wants. The guru added: “That’s what makes America great.”
