Farmer Bros. Co. has approached a major stakeholder about buying its shares and the holdings of other investors in the Torrance-based coffee distributor.
But people familiar with the talks say that discussions were at best in the exploratory stage and that there was no assurance a deal would be struck. The stakeholder, investment firm Franklin Mutual Advisors, has been urging management to buy out shareholders and take the coffee company private.
Franklin, which owns 9.6% of the commercial coffee company, disclosed the negotiations in a regulatory filing Tuesday, saying it would accept a price in the low-$400 range, or about $74 million for its holdings.
Franklin would commit to sell all of its shares only if the same price was offered to all public shareholders.
The Short Hills, N.J.-based investment company named the price and conditions for selling its shares in response to an inquiry made by Farmer Bros. several months ago, according to a Securities and Exchange Commission filing.
Farmer Bros. confirmed Tuesday that the discussion took place and said it would consider the suggestions made by Franklin.
Franklin has been the most vocal critic of Roy F. Farmer, the 86-year-old chairman of the company, over his reluctance to disclose key financial and corporate information.
The communications between Franklin and Roy E. Farmer, the company’s president and son of the chairman, are expected to be discussed at Farmer Bros.’ board meeting today, though it is not on the official agenda, according to the company.
Franklin filed the 13-D statement at the end of a trading day when only 200 shares of the thinly traded Farmer Bros. stock changed hands. The stock fell $4.75 to $309.25 on Nasdaq.
Franklin and other shareholders also have challenged the dearth of independent directors on the board and have questioned the purpose of a $300-million cash stockpile in the company’s coffers.
Outside shareholders own 909,000 shares, or about 47% of the company.
At $400 a share, Farmer Bros. would have to pay about $365 million to cash out Franklin and the other stockholders. But Farmer Bros. said any discussion of price at this point was “speculation.”
Farmer Bros. also is fighting with family shareholders. Last week, Steven Crowe, Roy F. Farmer’s nephew, filed a petition to wrest control of four family trusts holding a 9.8% stake in the company. That stock is owned by Crowe and his sister, but the firm’s chairman retains voting control of the shares.
In his lawsuit, Crowe alleges that Roy F. Farmer has executed a nearly 50-year plot to freeze the Crowe family out of the business and has resisted the family’s efforts to gain board representation.
The petition asks the court to appoint City National Bank as the trustee and to end “years of abuse by Roy Farmer of the trust that was placed in him over the Farmer family fortune,” said Adam Streisand, Crowe’s attorney. “Farmer is abusing his power over trusts that are supposed to benefit the Crowe side of the family to solidify his dominance over Farmer Bros.”
Roy F. Farmer responded to the Crowe lawsuit, saying in a statement that he regrets Crowe has chosen to air family matters with the public.
“The Farmer family is proud of its 52-year history of protecting the assets of Farmer Brothers for its public shareholders as well as its family shareholders,” the statement said.
The company said the trust has performed well as an investment.
According to the company, the value of Crowe’s trust “has grown from $17 per share in 1980 to more than $300 per share today.”