This week's items: Charles Craig, bailing out of Gevity HRJennings opens the parachuteSunCoast responds: Reporting damaging, below standards
Coffee Talk (Sara/Mana edition)
Sometimes it's best just to move on
Charles S. Craig, the Wall Street investor who led the leveraged buyout of Staff Leasing in mid-1990s, has let it be known that he no longer wants to be Gevity HR's largest shareholder. With 4.8 million shares of Gevity, according to the company's most recent proxy statement, Craig was by far the largest shareholder - at 23.3%.
But Craig, who served as then-Staff Leasing's CEO in 1996 and 1997, told Gevity's board he wanted to reduce his stake in the company to below 10% so he would no longer have to file ownership reports with the Securities & Exchange Commission. He also said he wanted to liquidate so he could fund his new business interests.
Gevity's board is eager to accommodate Craig. In the proxy it said it wanted "to avoid the possible adverse effect" on its stock and "to protect us from the sale of blocks of stock to purchasers who might want to pursue agendas not in the best interests of Gevity and our shareholders."
But here's the thing: Craig was expected to sell his 3.1 million shares back to the company for roughly $16.5 million. While that sounds like a chunk, it's only about $5.38 a share, nowhere close to company's existing $22-a-share price.
It has been a rough ride. Craig watched the value of his 4.8 million shares go from $86 million in 1997 when the company went public down to $12 million at the end of 2001. If he were able to sell all of his shares at today's market price, they would command $105 million. But when you want out, you want out. Instead of liquidating at $22 a share, Craig is selling for about $5.40 a share.
Jennings opens the parachute
You think Colonial BancGroup Inc. executives were expecting Christine L. Jennings to walk so soon after the Alabama holding company closed on its purchase of her Sarasota bank?
Judging by the sustained silence coming from Montgomery, Ala., where the holding company is based, and from Bonita Springs, Colonial's regional headquarters, Coffee Talk will vote no on that question.
A day after Jennings announced her exodus Jan. 13, there were still no Colonial executives willing to comment on their sudden vacancy in Sarasota. Jennings could not be reached for comment, either.
Harlan C. Parrish, Colonial's Southwest Florida president and chief executive in Bonita Springs, promised to get back to GCBR as soon as he had something to say. W. Flake Oakley IV, the holding company president, didn't return a message left for him in Montgomery.
Which leaves Coffee Talk to ponder life after the merger for a community banker.
Jennings made out pretty well when Colonial bought Sarasota BanCorporation Inc. for $40.5 million in stock. The chairwoman, president and chief executive helped found Sarasota Bank in the early 1990s.
Her employment contract called for a 2003 salary of $160,000, plus bonus. (Her 2002 bonus was $40,000.) After the Colonial deal, she was free to quit with a $478,400 severance. Her Sarasota BanCorporation stock was worth about $3.1 million from Colonial.
So, at age 58, Jennings has come into roughly $3.8 million, before taxes in the past year.
SunCoast responds: Reporting damaging, below standards
We were disappointed in the Jan. 2 article, entitled 'We're Having Fun,' about SunCoast Bank due to the inaccuracies pertaining to several financial areas of our bank. Accordingly, we present the inaccurate statements followed by the correct information.
1. GCBR: "SunCoast generated $1.73 million in losses through Sept. 30, 2003, more than twice the amount of losses of each of its other Sarasota classmates (Bank of Commerce, Landmark Bank and Peoples Community Bank)."
SunCoast response: This is inaccurate. SunCoast lost $1.09 million through Sept. 30, 2003.
2. GCBR: "At the close of last week, SunCoast's shares were trading at $9 a share - $1.52 less than the bank's book value."
SunCoast response: SunCoast Bank's shares were trading at $9.05 on the date mentioned, which was 1.24 times above its book value.
3. GCBR: "SunCoast's board confronted a dilemma in September when it decided to raise an additional $2.25 million for growth: A common stock offering at, say, $9 a share could dilute the value of existing common shares by 25% and send an unpleasant signal to public investors."
SunCoast response: SunCoast Bank's book value per share on Sept. 30 was $7.31. If an offering of 225,400 shares were sold at $9, the book value of all shares would increase to $7.79, an increase of 48 cents, or 6.6%.
4. GCBR: "To avoid the dilution, SunCoast raised the new capital in a private placement offering of 225,400 shares of convertible preferred stock. The preferred stock now obligates SunCoast to pay dividends totaling $13,500 on Sept. 30, 2003 and 2005 (6 cents per preferred share). Or, the preferred holders can convert those shares to common stock at a price of $8.50 a share on those two dates. In effect, SunCoast has postponed the date of dilution."
SunCoast response: This statement is false and misleading. There will be no dilution in the value of common shares upon conversion of the preferred stock to common, all of which will occur as of Sept. 30, 2005. Therefore, the board did not select a private offering of convertible preferred stock to postpone the dilution.
This type of reporting does not reflect the past editorial standards of the Gulf Coast Business Review, and it is damaging to our bank and its shareholders.
H. Ronald FoxworthyJohn T. StaffordWilliam Gnerre
Chairman President & CEOExecutive VP & COO
Editor's note: 1) The $1.73 million in losses was calculated on the basis of operating losses. That should have been specified. 2) SunCoast's executives are correct in saying the company's stock was trading at $9.05 a share; we rounded to $9. Our calculation of book value is based on the following: As of Sept. 30, total stockholders' equity of $7,370,000 divided by 700,000 common shares outstanding equals $10.52 per share book value. 3) Hypothetically, had SunCoast's board chosen to issue 250,000 common shares at $9 a share to raise $2.25 million and not had issued preferred shares, the new common shares indeed would have diluted the value of common shares, but not to the percentage we stated. Depending on the date of the hypothetical offering, say, between June 30 and Sept. 30, the dilution would have been minimal: from 0.5% to 4%. SunCoast executives show above that a common offering at $9 a share would have increased the value of shares; the book value and number of shares to be offered in their hypothetical offering, however, are less than what we calculated. 4) GCBR failed to note in the September 10Q that the preferred shares are "subject to antidilution adjustments."