Carl Karcher Threatening to Oust Company Directors
Frustrated with the direction Karcher Enterprises Inc. has taken recently, the company’s colorful founder, Carl N. Karcher, is threatening to oust the company’s directors.
In a statement released by the Carl N. & Margaret M. Karcher Trust, Karcher is threatening to launch a proxy battle for control of the seven-member board of directors if it does not go along with changes he proposes at the Anaheim-based parent of the Carl’s Jr. fast-food chain.
Though the statement does not detail what changes Karcher wants, it says he thinks the company “should aggressively address its disappointing operating, financial and stock market performance by supplementing current cost-cutting efforts with creative means of enhancing revenues and market image.”
Karcher, who is chairman of Karcher Enterprises’ board and who owns about 34% of the company’s stock, has reportedly been “rebuffed” in efforts to persuade other members of the board to back his restructuring plan, the statement said.
Reached Tuesday night at his Anaheim home, Karcher would not comment on specifics, saying that the statement “speaks for itself.” Asked how the board has rebuffed him, he said, “They just didn’t agree with me, and I have said enough.”
Karcher’s attorney, Andy Puzder, said that Karcher released the statement so that all shareholders would be notified at the same time. He would not comment further.
Karcher’s personal finances have suffered unduly by poor performance by Karcher Enterprises, the statement said. He has retained the law firm of Fried, Frank, Harris, Shriver & Jacobson to help him in his fight for control of the company he founded in the 1940s.
The company’s financial condition has hurt Karcher’s personal finances, according to Tuesday’s statement.
Last year, Karcher signaled his desire to reduce his holdings by supporting a bid by Los Angeles investment group Freeman Spogli & Co. to take the company private. Karcher’s board of directors rejected the $9.50-per-share offer.
Karcher Enterprises reported a $5.5-million loss for its fiscal year ended Jan. 25, compared to a $13-million profit in the previous year. Revenue fell by 7% to $502.6 million, down from $540.4 million.
In March, according to federal Securities and Exchange Commission documents, Carl Karcher was obligated to pay off a promissory note on land secured by Karcher Enterprises’ corporate headquarters. The note had an estimated unpaid principal of $4.3 million.
In May, Karcher was sued by Wells Fargo Bank for defaulting on a $575,000 loan. The suit, filed in Orange County Superior Court in Santa Ana, alleged that the Carl N. and Margaret N. Karcher Trust had not made monthly payments on the loan since December. Karcher was listed as trustee.
In June, Franklin J. Karcher, a brother of the founder and a former Karcher Enterprises executive, sued the company for fraud and breach of contract. The suit, which sought $2 million in damages, alleged that the company overstated the value of a dozen Carl’s Jr. restaurants in Arizona that Franklin and his wife, Lucille, agreed to purchase in 1990.
