Richard Pechter, a member of the Financial Industry Regulatory Authority’s board of governors, has offered to buy the money-management unit of investment research firm Value Line Inc.
Pechter said he would top a deal approved by Value Line’s board in July that will convert the asset-management unit into a trust that shares residual profits with five unnamed directors. He hasn’t received a response from the New York-based firm, he said today in a telephone interview.
“I’m more than happy to pay exactly what the bid was, plus $250,000,” Pechter said. “If the deal they’ve proposed is a good deal for Value Line shareholders, my deal should be better.”
Jean Buttner, Value Line’s majority owner, was barred by regulators in November from any management role in the investment-advisory unit after settling a civil suit with the Securities and Exchange Commission. The SEC alleged Value Line defrauded fund shareholders by charging more than $24 million in improper brokerage commissions. Buttner, who didn’t admit or deny the claims, was fined $1 million while the company paid $43 million in reimbursements and penalties.
A telephone message for Howard Brecher, Value Line’s acting chairman and chief executive officer, seeking comment on Pechter’s bid wasn’t returned.
Pechter’s offer was reported earlier today by the Wall Street Journal.
Buttner in April forced the replacement of all five independent directors at Value Line after a disagreement over dividend policies. The new directors include Alfred R. Fiore, chief of police in Westport, Connecticut, where Buttner lives.
The plan approved in July converts the money-management unit into a trust, according to an Aug. 31 regulatory filing. Value Line will receive non-voting shares entitling it to half the trust’s residual profit and 41 percent to 55 percent of its revenue.
The filing didn’t reveal whether the directors were paying anything for their interests in the trust.
“The company should explain why this makes sense and they haven’t done that,” Pechter said.
He called the Value Line franchise “an extremely valuable name.”
The firm is best known for its Value Line Investment Survey used by stock pickers. The seven mutual funds run by its money-management unit hold about $1.5 billion in assets, according to data compiled by Bloomberg.
Pechter is a former director of Donaldson, Lufkin & Jenrette, a New York-based investment bank acquired by Credit Suisse Group AG in 2000.
The Financial Industry Regulatory Authority, known as Finra, is the independent regulatory group for the securities business. It oversees almost 4,700 brokerage firms, according to its website.
Buttner, 75, owns about 87 percent of Value Line voting stock through Arnold Bernhard & Co. Value Line was founded by her father, Arnold Bernhard, in 1931 and built a reputation for providing independent stock evaluations and recommendations. Buttner took over in 1988 after her father’s death.
Value Line rose 48 cents, or 3.6 percent, to $13.94 at 4:15 p.m. New York time in Nasdaq trading. The stock has fallen 38 percent this year.