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A Bittersweet Harvest For American Maize

News: Analysis & Commentary: FAMILY FEUDS


William Ziegler III, longtime chairman and chief executive of American Maize-Products Co., has suffered many indignities in recent years. In 1993, the 67-year-old had to hand over the CEO reins to a younger executive who promptly squeezed sharply higher profits from the laggard corn-products and tobacco company. Next to go were Ziegler's perks: The three company planes were axed, as were the jobs for his children, including the one whose work included racing a Maize-sponsored sailboat. The family of Helen Ziegler Steinkraus, Ziegler's sister and a major shareholder, sued, arguing that Ziegler had run the company improperly. Finally, on June 28, Ziegler's largely handpicked board unceremoniously stripped him of his chairman's title.

But it looks as though Ziegler, better known as captain of his yacht than as a captain of industry, will have the last laugh. On July 26, he and other directors agreed to sell Maize, based in Stamford, Conn., to French agricultural giant Eridania Beghin-Say for $430 million. The key to the deal: Eridania's promise to sell Ziegler 88% of Maize's Swisher tobacco unit for $165 million--substantially less, say some familiar with the company, than it is worth--and to loan him $20 million to finance the transaction.

It's a sweet deal--for Ziegler. Another bidder, Pexco Holdings Inc., made a last-ditch offer of $225 million for Swisher on July 24. Pexco, which owns 4.5% of Maize's equity, wants to combine Swisher with its existing tobacco holdings. "Ziegler has blackmailed this board into preferential treatment for himself," Pexco CEO Leonard D. Pickett said after the board vote. "This board shortchanged the interests of all the other shareholders." Maize directors say Pexco's offer was untenable given Ziegler's opposition. Says an Eridania spokesman: "Those who want to criticize can say what they want." Ziegler and Maize execs won't comment at all.

TOO LATE. The mess arises from a single share of stock. In 1973, Ziegler and Steinkraus divvied up an odd number of shares, bequeathed by their parents, of the small stock class that controls Maize's board. Ziegler took the odd share, paying his sister its $436.87 book value--and quietly took control of the company. His sister discovered the share's importance years later and has sued unsuccessfully to have the shares re-distributed.

Since that transaction, Ziegler has pretty much done what he wanted, irritating shareholders who, until early this year, were stuck with a stubbornly flat stock (chart). For months, he has been blocking efforts by Eridania, Pexco, and CPC International Inc. to acquire all or part of Maize. When Maize's board revolted and voted to accept an Eridania offer in February, Ziegler sued directors for trying to issue new shares that would have diluted his control. "It's frustrating," says A. Alex Porter, whose Porter Felleman Inc. has been a major shareholder since 1989. "Ziegler owns [few] of the shares, but he has prohibited shareholders from receiving anything like fair value."

Indeed, most shareholders--left with a more widely traded class of shares that elects only a minority of directors--have been powerless to force Ziegler's hand. Rival Archer Daniels Midland Co., which owns 28% of these shares, unsuccessfully tendered its stock in support of the previous Eridania bid. ADM made an unsuccessful informal offer to buy Maize in 1992. ADM never renewed the offer, and it says the shares are held as an investment.

Maize's improved performance of late makes it an attractive takeover candidate, notes Prudential Securities Inc. analyst John M. McMillin. Demand for its corn sweetener could explode if European markets allow the product to be used in soft drinks, as it is in the U.S. And Swisher, the largest U.S. cigar maker, reported operating profits up 73% in 1994, to $24 million. All told, Maize had 1994 revenue of $604 million, up 12%, and operating profits of $56.2 million, up 261%.

But Ziegler, armed with his extra share of stock, has rejected most of the bids that could have reaped Maize's shareholders a greater return. CPC offered $500 million for the corn business in February, and Pexco's Pickett argues that the whole company, net of debt, is worth as much as $616 million. Maize directors, whom investors credit with trying to do their best in an impossible situation, sound eager to put the ordeal behind them. "Despite its inability to put together a doable deal," says director C. Alan MacDonald, the board "tried to act responsibly through the whole thing." Ultimately, though, the only doable deal for American Maize's long-suffering shareholders was the one that makes Ziegler a very rich man.By Elizabeth Lesly in New York, with Mia Trinephi in Paris

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