Quartet: Eleanor Ch. 02

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As their business continued to thrive, the two brothers remained close as did their wives. While the travel was divided evenly between them, it was still demanding and their "hands-on" approach to managing their affairs kept them on the road constantly. They had solemnly sworn to their wives that they would take proper vacations and in order to do so, they needed someone to pick up the travel obligations while they were away. Happily, they had hired a young engineer from California who was not only familiar with trestle construction but was a "rail fan" as well. Hamish McDougall was as American as anyone could be, despite his Scottish name and heritage. His love of railroading and his fascination with its history along with his engineering skills made him an ideal partner for the two older men.

When he had worked for the brothers for a little over a year, Robert and Harold discussed how they could include him in the ownership of the business. Both of them realized they wanted to wind down their involvement and reduce the demanding travel and in Hamish they had found the ideal successor to them. Although it was a private family business and no shares were ever issued, the two men worked out an agreement that would give Hamish an increasing share of the business on an annual basis; up to one third as a maximum. They agreed on three percent per year and Hamish was delighted and somewhat overcome by their generosity. He was barely thirty years old and he was being given partial ownership of one of the most successful businesses in a field which he dearly loved. He happily took on the new responsibilities and consequently proved the brothers' assessment of him to be correct. He was their natural heir.

Robert and Eleanor traveled through Europe and the Middle East on their vacations; carefully planning them in advance and seeking out the destinations that most fascinated them. Both were fascinated by the origins of Western Civilization and were excited by their trips to Egypt, Turkey, Israel, Greece and the Greek Islands. It was like living the history books live. They had little use for the conventional tours and tourist stops unless they were with someone who could explain their history and relevance. They spent their money wisely on tour guides who would take them to the out-of-the-way spots and allow them to see and experience the real history of their chosen locations. It was like going back to school and yet, they couldn't get enough of it. The people they met along the way, many of whom were looking for the same experiences as they, just added to the delight and satisfaction of their visits to these far away places.

Six years after they had included Hamish in their plans, the brothers were approached by a representative of an unnamed American corporation who were looking to acquire Thompson Bridge and Trestle. It caught both the brothers by surprise and Robert quickly called a meeting with Harold and Hamish to discuss how to respond. The buyer was unknown, but there were only a few possibilities; the most likely of which was United Eagle Foundries, their largest competitor. UEF had begun as a North-Eastern steel producer and had adapted before the malaise of the "Rust Belt" had befallen them. They diversified into steel related maintenance and fabrication industries and presently were one of the larger suppliers of stamped steel auto parts in North America. They had acquired two small trestle maintenance and repair companies along the way and had generally squeezed the rest of their competitors out of the eastern U.S. market. It wouldn't surprise either brother if they were looking to establish control of the entire North American market with the acquisition of Thompson Bridge and Trestle. They had the financial wherewithal to pull it off.

Hamish was now if line for eighteen percent ownership of T.B. & T. and his only real concern was that there wouldn't be a place for him if the company was sold. He loved the work, relished the on-site travel and generally didn't want to give up this life-style despite what financial rewards might be forthcoming. He needn't have worried. The prospective owners had done their homework and knew well of his talents and value. He was named as a part of the acquisition as were both brothers. It was decision time.

The three men decided that it would be appropriate to listen to the offer and then decide on a course of action. Both Robert and Harold wondered aloud if they could work for someone else after all the years of self-determination and both had serious doubts. Hamish too had concerns. He had stepped into an ideal situation and was reluctant to become a faceless figure in a large corporation. On the other hand, the offer hadn't been made and so they had no idea of who they were really dealing with and in the end they decided to take the next step and see just what was "on the table".

They contacted the agent for the buyer and set up a preliminary meeting in Calgary to discuss more details; indicating at the time that they would expect to be told who the prospective buyer would be and that they would be dealing directly with them and not through a third party. After some reluctance on the part of the agent, he promised he would contact the buyer and pass along their request. Two days later, the terms for the meeting were met and a date was set.

Both Harold and Robert were curious what value a competitor might put on their business. For Robert, it might mean he could step away from the business and spend as much time as he wanted with Ellie. For Harold, it meant he and Rosalind could start their own business; one that Rosalind had suggested a couple of years earlier. She was interested in Photography and wanted a small studio of her own. Harold knew she had the talent and he could help her with the day-to-day running of a business and he saw that as a way to keep busy and yet gain relief from the stress and strain of their current responsibilities. Only Hamish worried that it might mean the end of his love affair with the railroad bridges of the past.

The meeting was held in a private suite at the Westin. It began at ten on a Tuesday morning and Robert had booked the room for two days, assuming that if there was substance to the offer, that more detailed discussions would be needed. As it turned out, the principals were indeed United Eagle and they were very interested in establishing control of the trestle maintenance business in North America. It took them quite a while to get around to specifying their offer, but eventually they suggested they would be willing to offer $85 million U.S. dollars for the business; half in cash and the balance in U.E.F. shares. The offer was dependent upon all three men continuing in senior management positions in the company.

Neither Robert nor Harold were poker players and the immediate flush of their complexions must have signaled to the agent, if not the principals, that the offer was either far greater or far less than the men had expected. Hamish, for his part, remained passive and blank-faced; doing everything possible not to betray his immediate inclination to faint. Robert said nothing for what seemed to be an interminable amount of time and then looked up from the proposal sheet in front of him. He began slowly and in the most serious voice he could muster.

"I think my partners and I need to discuss this in private before we respond. There are some issues that will need our attention before we can give you our impression of this offer." Both Harold and Hamish nodded but said nothing.

"I have arranged for a private adjoining room so that we can meet without having to leave the suite. In the meantime, I have arranged for a buffet lunch to be served at noon in the other room. I suggest we reconvene at lunch and we should have formed a response to your offer. Will that be OK?"

Franklin Yarborough of U.E.F. was the head of their delegation. He was the Chief Financial Officer and had the authorization of the C.E.O and their board to conduct the negotiations.

"Yes, of course Mr. Thompson. I think we could both use a break at this point. We'll meet here at lunch. If you have any questions in the meantime, please don't hesitate to ask."

The three men walked silently into the adjoining room and closed the door behind them. In fact, there were two doors and Robert took the trouble to close both of them. He walked to the window and looked out over his city without speaking. It was Harold who finally had something to say.

"Robert, did you ever imagine?" he asked in wonder.

"Never! Not in my wildest dreams." was his simple response.

The three men stood looking at each other with surprise and yet a mixture of concern. Robert was the first to try and pull their thoughts together.

"First, we need to get a look at their share price history over the past ten years. No point in taking shares if they aren't going to perform. Second, I'm guessing this isn't their best offer and may even be "low-ball", thinking we don't know what our business is worth. And third, I want the option to leave the business; either right away or in a fixed short-term period. We should be responsible for the transition period and the rest should be up to us. Does that make sense?"

"Yah, sure ... you ... you've been thinking about this quite a bit, haven't you?" Harold asked.

"Some, all right." He looked at Hamish and smiled. "Well, what have you got to say about all this?"

"I ... I don't know what to say. I'm going to be a multi-millionaire if this goes through. I'm having a hard time believing it." he said, shaking his head.

"I know what you mean. All we knew is how to make it work. We never thought about how much it was worth. Maybe we should have." Robert said thoughtfully.

"What do we do next?" Harold asked.

"Our homework right now is to find out what the stock is worth. I'll phone Ellie. She'll know who to talk to. Robert picked up the phone and dialed Eleanor's work number. He talked to her briefly without giving her much detail and asked her advice on who he could consult. Eleanor had a name immediately and gave her husband the number. After hanging up, Robert dialed the number and asked for Claude Fortin. After a brief pause, he introduced himself and asked for an analysis of the A.E.F. stock with the understanding that it was in lieu of cash in a sale transaction. He warned the broker not to reveal the conversation on threat of Eleanor coming after him and with a laugh, that was enough to warn Claude to keep the information to himself. He promised to phone Robert back within the hour with an assessment and would fax him details to the hotel if required.

"OK, that's a start. What's next?" Robert said, almost to himself.

"Shouldn't we get an independent appraisal of our business as a reference point?" Hamish asked quietly.

"You can do that?" Harold asked, surprised.

"Yes, there are firms who can give you an estimate of value and the strengths and weaknesses of a business. They do it all the time for the Brokerage industry." Hamish answered

"When Claude calls back, I'll ask him for a reference. I wouldn't be surprised that his outfit doesn't do appraisals." Robert said simply.

The group got together for lunch and a light discussion surrounding the history and progress of Thompson Bridge and Trestle. They were obviously impressed that the company had grown so successfully and with such command of the western market without a large staff. They were curious how the brothers and Hamish had run it without a larger staff.

"Simple. We go out in the field and manage the jobs on site. We never were office people and this way, we know exactly what's going on and what obstacles need to be overcome. There isn't much about any of our projects that one or the other of us doesn't know and hasn't been on the site within the last month or so." Harold offered.

"Hummph!" Yarborough exclaimed. "Sounds like something we could learn. I count more staff than I care to these days. No substitute for knowing what's going on." he grumbled.

The phone rang as the lunch was wrapping up and Robert excused himself to take the call in the other room. Claude Fortin had done a quick analysis of A.E.F. and concluded they were a solid but underperforming company. Robert then asked Claude about the appraisal and as Hamish had guessed; his firm was capable of performing that service. Robert gave him a verbal OK to begin and made himself available to discuss details with Claude's firm as necessary. Hamish and Harold had returned to the room and with the doors closed, Robert filled them in on his conversation with Claude.

They returned to the dining room and Robert resumed their conversation with Yarborough.

"We've requested an appraisal of our business with an independent Brokerage house in the city. We've never entertained the idea of selling before and I should have thought of this before today's meeting. I apologize that it will delay our decision." he said straightforwardly.

"Am I to assume that you are at least willing to discuss and negotiate the sale of your company Mr. Thompson?" Yarborough asked.

"Yes. There are some conditions we can discuss, but assuming we come to some agreement on the value of the company, we are willing to discuss the sale to A.E.F." Robert stated.

"Excellent ... then this has been a productive meeting. You have my number Mr. Thompson. Please don't hesitate to call if I can be of assistance and please let me know when you are ready to continue our discussions." Franklin Yarborough rose and shook the hands of all three men. "It's been a pleasure, gentlemen. I look forward to a successful conclusion." And with that, they left the room.

It was quiet for a few moments after the prospective buyers had left and finally Hamish spoke up.

"Did you notice that the only person in their group that spoke was Yarborough? None of the others said a word."

"I guess we know who the boss is." Harold laughed.

"Just as well." Robert said thoughtfully. "Just as well."

It took almost two weeks to get the appraisal completed before Claude's firm contacted Robert and asked for a meeting. The three owners met with Claude and the appraisal expert, Stanley Kwok, in the T.B.&T. offices. Claude passed out the Executive summary of the report to each of them and then began.

"It looks like they did come in with a low offer. From our perspective, this is a $100 million U.S. business and, depending on how it's run, possibly more. Also, depending on whether there are conditions on the sale of the stock portion of their offer, I would only accept stock in lieu of cash if I could sell it within a couple of months and convert it into something more growth oriented. Their cash position is quite good and they have money to spend, so you could hold out for an all-cash offer. Otherwise, you are in the driver's seat. Your E.B.I.T. is almost double theirs. Since you are a private company, they won't discover that until they do their due-diligence if you agree to sell. It will come as a pleasant surprise to them I'm sure.

"OK, thanks Claude. That puts us in the "cat bird seat" as I see it. We can shape this deal any way we want and still make it work for both parties." Robert said smiling.

"So what do we tell A.E.F. then?" Harold asked seriously.

"Good question. Why don't we talk about this and see if we can come up with a counter offer. We've got the written appraisal of our company and I'm sure they've got one too. It's 'show-down time' in this poker game!" Robert stated. "Claude, what would you suggest?"

Within an hour, they had worked out a counter-proposal which took care of the concerns over the liquidity of the stock and the management responsibilities. Claude promised to put it draft form and Robert agreed they would phone Franklin Yarborough the next day and schedule a meeting. As the meeting ended, Hamish left with a big grin on his face; on his way to meet his girlfriend at a local restaurant. Robert and Harold phoned the "girls" and suggested they meet at Chico's for dinner. It was an "easy sell" as the girls were more than anxious to hear the results of the appraisal.

It took a week to arrange the meeting, but that gave Robert, Harold and Hamish plenty of time to hone their proposal and rehearse their 'roles'. It was time well spent. The second meeting lasted less than three hours and resulted in a "basis of agreement" to sell Thompson Bridge and Trestle to American Eagle Foundries. The rest was paperwork, details and "Due Diligence." It took a month and a half for all the i's to be dotted and t's to be crossed, but on a sunny and windy Calgary day in February, the final papers were signed and the sale was complete.

Hamish McDougall was retained as Vice President of Western Operations with the clear understanding that he would be spending most of his time in the field, supervising and assessing job progress. Hamish was delighted with the assignment; keeping him close to his love of the railroad if not his girlfriend. Robert and Harold surprised him when they "topped up" his share of the business to 20% and Hamish was rewarded with nearly 20 million dollars in cash and stock. Robert and Harold split the remaining amount and entered "semi-retirement" with the understanding that they could be called on for "consulting duties" on major issues. It was a happy compromise for both of them.

The "Terrible Thompsons" on the other hand, had their concerns. What were they going to do with their husbands having all this time on their hands? Rosalind had her plan for the Photo Studio and Eleanor still had a part-time position with Promotions West, but what about their 'men'? It was a problem that needed to be solved, but neither 'sister' had a ready solution. As it turned out, one of the decisions would be taken out of their hands.

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Note: E.B.I.T. = Earnings before Interest & Taxes