Herrick Foundation sues to halt stock split at Tecumseh Products
12/9/2008Long a major contributor to community institutions like the Toledo Zoo and the Adrian Symphony Orchestra, the nonprofit Herrick Foundation is continuing a so-far losing battle for a bigger say in a company in which it holds stock.
The Detroit foundation said it filed suit yesterday in Lenawee County Circuit Court to try to halt plans for a stock split at Tecumseh Products Co., of Ann Arbor. Charity officials allege that the split would seriously "dilute the voting power" of individuals and institutions holding the firm's Class B voting shares.
"The stock split is an improper and illegal action " asserted Jeff Caponigro, spokesman for the foundation.
The lawsuit is another flare-up in a long dispute between members of the Herrick family, who founded Tecumseh Products in 1934, and company directors who say they rescued the manufacturing concern after years of family mismanagement.
The nonprofit is among the largest charitable foundations in Michigan, with assets of $187 million.
It gave out $8.3 million in grants for the fiscal year ended Sept. 30, 2007, which is the most recent information available.
That was down 11 percent from the prior year.
But the foundation's spokesman said the cuts are not to be blamed on the dispute with directors of Tecumseh Products.
"Nothing should be read into the fact that the grants dropped one year from another," Mr. Caponigro said.
And reports filed with the government by the charity show its fiscal health has become less reliant on the fortunes of the company over the last three years.
Stock in Tecumseh Products made up 15 percent of the charity's investment portfolio as of Sept. 30, 2007.
That was down from nearly a third of the portfolio in 2005.
The foundation owns even less of the firm's stock today. It sold 500,000 of its 1.3 million Class B shares in September. As of fall 2007, the charity also held $6.4 million in Class A shares.
However, like most other stocks, shares of Tecumseh Products fell steeply in 2008. The foundation also holds stakes in companies such as Exxon Mobil Corp., Microsoft Corp., and Procter & Gamble Co.
Both the firm and the charity were founded by the late Ray Herrick, a 20th-century industrialist who specialized in producing compressors for commercial refrigerators and air conditioners.
Tecumseh Products had headquarters in the Lenawee County community of Tecumseh until it moved this year to Ann Arbor.
The foundation has been a major donor to conservative causes, faith-based organizations, and community institutions in southeast Michigan and northwest Ohio.
Donations last year included $116,000 to Bixby Medical Center, Adrian; $250,000 to the Lenawee Community Foundation; and $120,000 to Herrick Memorial Hospital, Tecumseh.
The Toledo Zoo received $100,000 in 2006 for research and scientific collaboration.
Among grant recipients last year was McCord Road Christian Church, Sylvania, which got $20,000 for a building campaign. Pastor Andy Wiegand said the gift was appreciated.
But he declined to comment, saying the foundation asked the church to avoid publicity.
Among the foundation's biggest grants last year were $2 million for neurology research at Henry Ford Health System in Detroit and $920,000 to the College of Engineering at the University of Michigan in Ann Arbor.
Under the Tecumseh Products plan that the foundation is challenging in court, all stockholders would get the right to vote on important matters.
Currently, only Class B shares have that right. Foundation officials say the plan would dilute its voting power from 15 percent to 4 percent.
Shareholders last month rejected a foundation proposal to oust two of the firm's current directors.
Directors reject criticism from the Herrick Foundation, saying they are acting in shareholders' best interests.
But foundation officials say they want the board to consider restoration of stock dividends as well as sale of the company.
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.