U.S. Sugar Corp. rejected a $575-million buyout offer and kept it secret from employee shareholders because a sale didn't serve the founding family's personal interests, a federal lawsuit filed Thursday in West Palm Beach claims.
Three former U.S. Sugar workers who earned shares under the company's employee retirement plan say chairman William S. White spurned a buyout offer in 2005 and again in 2007 even though it represented a 50 percent premium over the stock's cash-redemption value. White allegedly wanted to ensure that founder Charles Stewart Mott's heirs - including White's own wife - kept control of the privately held Clewiston firm, which owns nearly 200,000 acres of sugar cane and citrus land across Florida.
"The most shocking thing about this case is that an extremely wealthy group - Claire Mott and her husband, William White - would essentially cheat the workers of U.S. Sugar," said Coral Gables lawyer Roberto "Bob" Martinez, whose clients are seeking $150-million in addition to punitive damages.
While the employee retirement plan is U.S. Sugar's largest shareholder with a 38 percent stake, it has no representative on the company's board of directors. The plan's members have only two ways to redeem their stock: by selling it back to the company or as part of a corporate acquisition.
U.S. Sugar CEO Bob Buker scoffed at the lawsuit's claims Thursday. In an interview from Brazil, he said the company - whose assets also include a railroad, mine, citrus factory and sugar factory - is worth roughly $2.5-billion. That's more than four times what agriculture baron Gaylon M. Lawrence Sr. and his son offered for U.S. Sugar, a figure Buker said was too low to even bother running by the company's shareholders. "If somebody offers you $100 for your house, you just walk away," he said.
How much the company is worth - and how much it should pay shareholders who want to cash in their stock - could prove key points of disagreement in the case. Martinez said it was wrong for U.S. Sugar to be redeeming shares for roughly $200 per share around the same time it was rejecting the Lawrences' $293-per-share offer. If U.S. Sugar really is worth $2.5-billion, or nearly $1,200 per share, Martinez said, then a $200-per-share redemption rate is unfair.
But Buker said there's nothing inconsistent about having a cash-redemption value of $200 per share and a buyout value of $1,200 per share. The former is based on income flow, he said, while the latter is based largely on asset values.
The lawsuit alleges further misdeeds by company chairman White. According to the complaint, White fired then-CEO Robert Dolson for negotiating the $575-million price with the Lawrences and then wired Dolson a $10-million "pay off" to keep him from telling shareholders about the offer. Buker said Dolson's departure and fee were part of a previously arranged retirement severance plan. (Attempts to reach Dolson and the Lawrences were unsuccessful.)
Although Claire Mott White and her children reportedly own just 3.5 percent of U.S. Sugar's stock, the suit claims that she and husband White effectively control the company via their control of the Charles Stewart Mott Foundation. The charity owns a 19 percent stake in U.S. Sugar.
Scott Barancik can be reached at firstname.lastname@example.org or (727) 893-8751.
About U.S. Sugar Corp.
History: Charles Stewart Mott acquired and renamed the bankrupt Southern Sugar Co. in 1931
Headquarters: ClewistonEmployees: 1,700
Primary business: growing sugar cane and citrus
Assets: 187,858 acres of farmland in Florida; railroad; citrus and sugar factories; mine
Claims to fame: largest supplier of private label, not-from-concentrate orange juice in United States; largest U.S. producer of refined cane sugar
Source: U.S. Sugar
Top U.S. Sugar Corp. shareholders
Name Est. percentage owned Comment
Employee stock ownership plan 38 percent no seat on board of directors
Mott Children's Health Center 22 percent public charity in Michigan
Charles Stewart Mott Foundation 19 percent same chairman as U.S. Sugar
Claire Mott White family 3.5 percent husband William White chairs U.S. Sugar