PUHI – As a youth, Stephen M. “Steve” Case liked to swim at Po’ipu. As a 42-year-old, he owns about six miles of island oceanfront property, including the Maha’ulepu area. Most of the southeastern beaches of Kaua’i and a chunk
PUHI – As a youth, Stephen M. “Steve” Case liked to swim at Po’ipu.
As a 42-year-old, he owns about six miles of island oceanfront property, including the Maha’ulepu area.
Most of the southeastern beaches of Kaua’i and a chunk of the island’s business base are now owned by Case, a Punahou graduate and chairman of America Online.
He is tied for 189th on the Forbes 400 list of richest Americans, with a net worth estimated at $1.5 billion. That’s $15,000,000,000, and likely makes Case Kaua’i’s first known billionaire.
A pair of companies established for his personal and family investments have purchased Grove Farm Co. Inc. for just over $26 million, cash.
The Case entities – ALPS Investment, of Virginia, and ALPS Acquisition Sub Inc., a Hawai’i corporation, paid roughly $1,203 an acre for Grove Farm’s 21,600 acres, in a deal approved by Grove Farm’s shareholders last Friday.
But when the inherited debt that comes with the sale ($61 million) is added to the sale price, plus $14 million committed for needed improvements to Kukui Grove Center and company water systems, it is a $100 million deal, explained Dan Case, a Honolulu attorney, Kaua’i native and father of Steve Case.
During an exclusive interview at Grove Farm’s headquarters yesterday, the elder Case laid out the entire acquisition process, from the time father told son about some choice Kaua’i acreage for sale.
Dan Case said his son, who was aware of Grove Farm’s financial difficulties, said “yes” when his father asked if he’d think about buying the company. The elder Case’s Honolulu law firm, Case Bigelow & Lombardi, represents Grove Farm on certain matters, so outside counsel Jim Cribley asked Grove Farm chairman Hugh Klebahn if he’d entertain an offer from Steve Case.
Klebahn and the board said “yes,” also. The bid came in, was accepted by the board and a near-unanimous vote of shareholders, and the sales documents were filed with the state Department of Commerce and Consumer Affairs Friday morning.
The state Public Utilities Commission must approve the sale before it’s final. Grove Farm shareholder Mike Sheehan of Hanalei has filed a lawsuit, claiming the shares are worth more on the order of $200 a share than the $152 per share accepted.
The sale was approved at the Kilohana carriage house by 98 percent of the shareholders. There were, as of early November (the sale date of record), 171,122 shares held by 175 people, most of them descendants of the founders of Grove Farm, the Wilcox family.
The 136-year-old company was founded in the Kingdom of Hawai’i during the rule of King Lot Kamehameha V.
When the Wilcox family built elaborate systems to bring water down from the mauka acreage, the sugar plantation was a money-making machine. After ceasing sugar operations in 1974, the company became a land management and development firm, but suffered at the hands of two hurricanes and economic doldrums.
There was doubt, even in the merger proposal, that the company as currently operating could continue. Some $3.5 million in debt payments are due before the end of this year, and millions more are due in subsequent years.
Citing the island’s poor economy and the company’s debts, cash needs and condition of its various properties, the merger agreement states, “These factors, among others, may indicate that the company will be unable to continue as a going concern for a reasonable time.” Grove Farm made $1.3 million in calendar 1998, but lost $11 million in 1996, some $4.4 million in 1997, and over $5.6 million last year. For the first nine months of this year, net loss was over $1.9 million.
The company has not paid a stock dividend in more than five years, and prior to the merger was not expected to be in a position to do so for several more years, according to the merger proposal documents.
Plainly, Steve Case is Grove Farm’s knight in shining armor. The company overnight moved from a tottering corporation with little money in the bank to an entity owned by one of the world’s richest men.
On the street, the word may be that Case made Grove Farm an offer it couldn’t refuse. In lawyerspeak, the corporation received a “superior acquisition bid,” Dan Case explained yesterday.
The ownership transfer takes place as a merger which sees Grove Farm the surviving company. By state law, even shareholders who don’t want to part with their holdings are required to do so if over 75 percent of the shareholders approve the merger, Dan Case explained.
The merger vehicle was chosen because of the company’s financial difficulty, he said. So, the existing Grove Farm directors are required to resign, and new directors from the Case corporations will take their place, once the sale is final.
Klebahn sent out letters Monday to shareholders, telling them how to redeem their shares for cash through the Chase Bank in San Francisco, which is the escrow bank.
A Wilcox descendant and company shareholder, Klebahn has agreed to stay on through the transition period and could remain beyond that, probably in his present capacity, if he desired. But he wouldn’t commit, adding that he is a San Francisco resident, not a Kaua’i resident.
For the time being, repairing the termite damage at Kukui Grove, upgrading the shopping center and beefing up the all-important water systems needed for further residential development in Puhi and Lihu’e are immediate concerns, Dan Case said.
No decision has been made about the spectacular Maha’ulepu coastal lands, or about finishing the Puakea Golf Course (building eight holes to make it an 18-hole layout and adding a permanent clubhouse).
It costs an estimated $1 million per hole to build a golf course. Even though the elder Case is a golfer (he hasn’t played Puakea yet), he said he and his son both know there are more pressing company, employee and community needs.
The elder Case will oversee Grove Farm’s operations from Honolulu and has no desire to move to Kaua’i.
“Honolulu is home,” he said.
That leaves the door open for the eight full-time Grove Farm employees to continue their current employment, Case said, if they wish. The plan, other than fixing up Kukui Grove and the water systems, will be the plan of the current Grove Farm management team, which includes vice presidents Allan A. Smith and Mike Furukawa.
“He is satisfied with my suggestion to him” that the present management continue, Dan Case said of his son.
The breath of life the new owner brings will allow Grove Farm to explore futures which, in its cash-strapped previous state, it could not consider, Klebahn said.
“We had no access to capital,” and debt payments were coming, he added.
Dan Case, who said his son was “delighted” when the deal was approved by shareholders, confirmed widespread community speculation that Steve Case plans to be a long-term owner of Grove Farm.
“It’s a long-range investment,” Dan Case said.
The elder Case, 75, said he and his son would have to become reacquainted with the acreage and the company’s current plans for the assets before making any longer-term priorities for development and improvements.
Steve Case was sent financial details and maps of Grove Farm and bought the property essentially sight-unseen. The last time he visited Kaua’i was several years ago on a vacation.
“We both have to learn about the property. I think it’s a valuable property,” Dan Case said.
Case said his son has shown no interest that he’s aware of in the 17,000 acres of Amfac land for sale adjacent to the Grove Farm property in Puhi.
The Grove Farm parcels are more attractive to Dan Case than the Amfac piece, he said.
And although his son could easily pay off all of Grove Farm’s existing bank debt in a single payment, he doesn’t foresee that happening.
“I don’t think the first order of business will be to pay down the bank debt,” he said.
Staff Writer Paul C. Curtis can be reached at pcurtis@pulitzer.net or 245-3681 (ext. 224).
