Looking Over the Pritzkers' Shoulders

An oversight board is now monitoring how a trio of family members runs the clan's Hyatt hotel empire -- in preparation for an IPO?

Thomas J. Pritzker and his cousins Nicholas and Penny are still running Hyatt Corp., the multibillionaire family's sprawling 207-hotel global business, but they're doing so on a tight leash, a source close to the family tells BusinessWeek Online. As part of an oversight process demanded by eight other Pritzker cousins, "strict independent supervision" has been installed over the trio. The move comes with the "trust but verify" approach that all of the cousins have agreed to as they seek ways to parcel out their $15 billion-plus fortune.

The source close to the family says Thomas, the CEO of Hyatt, and the others in the Hyatt triumvirate are being left in charge "in the tradition of family harmony." But the source adds that the ability of the three leading Pritzkers to exercise control going forward will be determined by whoever controls the equity in the company after a sale, a public offering, or whatever vehicle is ultimately used to turn the family's stake in Hyatt into equal shares held by all 11 Pritzker cousins. "The family hasn't been shy about bringing outsiders on board," the person says. "We can't foreclose any of the options."

The Hyatt oversight panel, which includes Tenet Healthcare CEO Jeffrey C. Barbakow, is operating much like a public company's board of directors. They're making sure that the trio of Pritzkers runs the Hyatt chain well and preserves its value for the family. "The members of the family chose in the tradition of family harmony to leave the trio in place and install strict, independent supervision and guidelines," the source says. "I don't see any difference between what has happened here and what is going on in the public markets."


  The structure, indeed, could help lay the groundwork for a public offering. It appears that the "all for one, one for all" ethic that ruled the Pritzker dynasty for four generations has been abandoned. The family is investigating a host of options for ways to divvy up the giant fortune, including sales of assets like Hyatt and the diversified $6 billion-a-year industrial conglomerate, Marmon Industries. As the person close to the family says, "I don't think anybody has a specific preference, [they just want] a solution at some point."

Differences will almost certainly arise over just how the giant pie should be divided. For one, the three Chicago-based Pritzkers who emerged in recent years as Hyatt's managers -- Thomas and his cousins, Nicholas and Penny -- have personal stakes in keeping the chain intact and in their control. Thomas, a 52-year-old lawyer, is the son of the late Jay Pritzker, who largely created and ran Hyatt. Nicholas and Penny, also attorneys, each have aggressively expanded its operations with new hotels and related ventures, such as senior living operations. "Hyatt is more emotional for some than for others," says the person close to the family.

Indeed, faced with reports that a public offering of Hyatt is likely, the traditionally press-shy Thomas Pritzker took the unusual step on Dec. 11 of commenting publicly to calm the speculation. "I can't foreclose our options in the future, but I can say we have no plans to take Hyatt public in the next several years," he told BusinessWeek Online. And people close to him say he intends to stay on indefinitely as the outfit's CEO.


  And yet, it appears all but inevitable that the family will have to take Hyatt public or sell it outright at some point to make sure each of the cousins can take their shares out. The family's interests in the global hotel operation -- including some 34 or so hotels that the Pritzkers own and their management agreements on 173 others -- may be worth as much as $15 billion alone, according to Bear Stearns lodging analyst John D. Mattesich, who did a rough calculation upon request from BusinessWeek Online. Cashing out on such as big asset without a sale of some sort seems all but impossible.

Just when that might happen is hardly clear, though. The market for public offerings of hotels has been dormant for over a year. The lodging business has been depressed since before the terrorist attacks of September 11 and is showing no signs of any uptick soon. But the source close to the family says the cousins are patient and willing to wait to see their holdings liquidated over the coming decade.

Despite the controls put on the ruling Hyatt trio, the source says the transition from a centrally run family operation to each Pritzker minding his or her own affairs is mostly a friendly move. "I think everyone has been pulling on the same oar. There has been agreement on the direction, and it's in the process of being executed," the source says. "Everybody is on fine terms. As you can imagine, there were some prickly issues, and so some people were upset. But everybody is talking, and it's under control."


  The amity is hardly unanimous, however. One cousin who remains quite put out is Liesel Pritzker-Bagley. The 18-year-old Columbia University freshman brought the family's otherwise quiet plans to the forefront by suing her father, Robert Pritzker, and her cousins over an alleged $1 billion that she claims was improperly taken from her trusts and distributed to the other cousins. Robert and the young Pritzker girl's mother, Irene, went through an acrimonious divorce a decade ago. Soon afterward, Liesel claims, her father effectively disenfranchised her from the family fortune. She sued in early December after learning of the family's plans to divvy up its wealth while leaving her out.

All the cousins agreed on Dec. 10 to a statement expressing their "regret" and disagreement with Liesel's action. The statement also said the family has set up a strategy through its Pritzker Organization to provide for "long-term reinvestment in our existing businesses [while] creating liquidity for all family members." Just how that liquidity will be achieved will likely be the next saga for the fourth generation of Pritzkers.

By Joseph Weber in Chicago

Edited by Douglas Harbrecht

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