Tlc Beatrice Could Use More Than TlcRon Stodghill II
When Reginald F. Lewis snared headlines in 1987 for his $985 million leveraged buyout of Beatrice Cos.' international operations, he made clear his intention to keep the $1.6 billion food conglomerate a family enterprise. After all, the deal was a gleaming symbol of progress by a determined African-American businessman. Yet one year after Lewis' death from brain cancer, there are signs that his family, which owns more than 50% of TLC Beatrice, may be having trouble maintaining that legacy.
On Jan. 5, the company, now known as TLC Beatrice International Holdings Inc., announced that Lewis' half-brother, Jean S. Fugett Jr., had stepped down as chairman and chief executive officer. Succeeding him as chairman: Lewis' widow, Loida Nicolas Lewis, a 50-year-old immigration lawyer who acted as her husband's informal business adviser over 24 years of marriage. Fugett, also a lawyer as well as a former National Football League tight end with the Washington Redskins and Dallas Cowboys, stays on as a director. Meanwhile, the company is scouting for a new CEO.
"GOOD JOB." TLC Beatrice is downplaying the changes, saying they are part of a long-planned succession. Still, the shakeup has raised questions anew about how TLC Beatrice is coping after the loss of Lewis, its hard-driving visionary. For the first nine months of 1993, revenues slid 1.4%, to $1.2 billion, partly due to recession and increasing competition in Europe, where its businesses operate. But more alarming are the weakened finances: In documents filed in December with the Securities & Exchange Commission, TLC Beatrice reported that working capital was off sharply (chart).
Both Loida Lewis and Fugett declined to be interviewed. TLC Beatrice officials say Loida Lewis planned to assume the helm after the one-year bereavement period customary in her native Filipino culture. "It was always expected that Mrs. Lewis was going to take over," says board member James E. Obi. "And although the results were not as good as expected, [Fugett] did a good job. It was not entirely his fault."
But sources familiar with the situation say Fugett's stepping down was prompted by private shareholders who had lost confidence in his ability. "Reginald Lewis was the company," says Gerald B. Unterman, president of GEM Capital Management, one of a few outside investors to own TLC Beatrice shares. "They need to replace him with a seasoned, proven executive familiar with the food business."
Shareholders' disenchantment with Fugett surfaced at the company's July annual meeting, where they confronted him about reports that TLC Beatrice was interested in acquiring the Baltimore Orioles. Fugett confirmed the reports and elaborated on his wishes to diversify. Confronted with such a bizarre scheme for a food company, "we were taken aback," recalls a shareholder at the meeting. Admits director Lee A. Archer Jr.: "I thought it was not the greatest idea in the world."
TOUGH SELL. Already frustrated by TLC Beatrice's flagging performance and the $22 million the company paid Reginald Lewis for five years' work, shareholders began pressuring the company to trade its stock publicly as well as to tap a new CEO. TLC Beatrice, known for being intensely private, bristled at the request. But in December, the company agreed to register its shares with the SEC. The registration will allow 1.6 million of the company's 9 million shares, now trading among private investors at roughly $45, to trade publicly. It will also require TLC Beatrice to report its financial results for the first time since 1991.
Selling its shares publicly will be tough unless TLC Beatrice can convince investors that it's headed in the right direction. That means naming a CEO capable of invigorating the company's European performance.
Beatrice does have some success stories there, such as its Franprix and Leader Price store chains in Paris. But in the premium ice cream business, such Beatrice brands as Artic in France and Sanson in Italy are squaring off against products from giants Grand Metropolitan PLC and Unilever PLC, which both want to dominate the market. In the first nine months of 1993, poor results in ice cream and desserts pushed sales of the grocery products division unit down 19%.
It's the kind of drama Reginald Lewis was known to relish. Even the title of his posthumous autobiography, due out this fall, smacks of his hard-boiled determination, asking sarcastically, Why Should White Guys Have All The Fun? Just now, though, his heirs aren't having much fun at all.