Carl’s Jr. Founder Karcher Sees His CKE Stake Plunge
Carl Karcher, founder of the Carl’s Jr. hamburger chain, has been forced to sell nearly 60% of his stake in Anaheim-based CKE Restaurants in recent months because of the company’s steadily falling stock price.
The tumbling share price and the stock sales have slashed the value of Karcher’s holdings by about 90%, or nearly $123 million.
The 82-year-old Karcher, who narrowly averted personal bankruptcy in the early 1990s, has liquidated about 2.1 million shares of CKE stock since April--including about 900,000 shares last week--in order to meet margin calls by his broker, Merrill Lynch & Co., according to Ed Pasquale, Karcher’s accountant.
The former CKE chairman had used his stock holdings as collateral for loans from the brokerage, but the recent downward spiral of CKE’s stock price led Merrill to demand that Karcher put up additional cash. When Karcher was unable or unwilling to put up the money, Merrill sold enough of his stock to cover the loans.
Officials at Merrill Lynch did not return phone calls Monday.
CKE stock has plunged from $40 a share last summer to $8.94 on Monday, down 6 cents on the day in New York Stock Exchange trading. The company has suffered because of sluggish sales and investor impatience over slower-than-expected progress in turning around its Hardee’s unit.
For Karcher, the margin calls forced the retired founder to sell his CKE stock when it is trading at its lowest level in more than three years.
A year ago, Karcher controlled about 3.4 million shares (including stock held in a limited partnership with CKE Chairman William P. Foley II) worth about $136 million. Today, Karcher owns about 1.5 million shares valued at about $13.5 million, according to Pasquale.
The latest margin call was spurred by CKE’s announcement last week that it would not meet second-quarter earnings estimates. In response, investors drove the stock price down 30% more.
The stock sales bring Karcher’s stake in the company to less than 3%.
Karcher founded Carl’s Jr., now part of the nation’s fourth-largest fast-food company, in 1941 with a $311 loan and a hot-dog cart.
In the 1990s, a string of ill-advised personal investments nearly pushed him into personal bankruptcy.
Karcher’s efforts to raise cash by selling control of the company sparked a boardroom battle that ended with his ouster in 1993. He was later named chairman emeritus.
Though Karcher has pledged CKE stock as collateral for other personal loans, those arrangements have not been affected by the recent price declines, his advisors say.
“He’s still a very rich man,” said Andrew Puzder, Karcher’s attorney. “He just doesn’t have what he used to have.”
