By DAVID MOON, Moon Capital Management
As a result
of a recent court approved agreement, a number of former Clayton Homes
shareholders have an opportunity to complete a bunch of paperwork, submit a
claim and, if their claim is approved, receive a check totaling about 10 cents a
share. I'm sure Knoxville will blossom as a result of this economic
always happens in these types of cases, this shareholders' litigation resulted
in little for the shareholders and a lot for the litigation.
Buffett and Berkshire Hathaway purchased Clayton Homes in 2003, some Clayton
shareholders believed takeover price was too low. (I was not among that
group, by the way.) Some shareholders grumbled to their brokers or
barbers. Some called local Clayton executives and complained. Some
went to the shareholders' meeting and plead their case.
course, some disgruntled shareholders handled things in the good ole' fashioned
American way: they filed a lawsuit.
Denver Area Meat Cutters and Employees Pension Plan as the plaintiff, a group of
attorneys filed suit to stop the acquisition. When the judge denied the
request to block the transaction, the plaintiffs sought an unspecific amount of
damages, alleging that the takeover price was too low and the shareholders had
Based on the
size of the agreed-to settlement, the lawsuit had nothing to do with reparations
for shareholders. These types of suits never do. At first, the suit
was about extorting money from Warren Buffett. If someone with a big
enough bullhorn could make a nuisance claim about the takeover price being too
low, maybe the billionaire would pay some chump change to make the irritation go
away. However, Buffett knows the Wall Street equivalent of what the folks
at the CIA and the NSA have always known: once you negotiate with terrorists you
just encourage more terrorism. Buffett refused to budge on the
It is not
uncommon for a law firm to file suit against a company like Clayton, then later
offer to withdraw the suit if the defendant is willing to pay the firm to go
away. If you've ever watched the Sopranos, this is called protection
money. 'If you pay me, I'll leave you alone and you won't see me no
more. If you don't take care of me, I'm going to keep suing your butt
until a court gives me some dough. I'll say I'm doing it to help the poor
little shareholders. Capisce?'
Almost two years after the completion of the acquisition,
the plaintiffs were awarded $5 million. The attorneys who represented the
Denver pension plan get $1.6 million of that, leaving the shareholders $3.4
million, or about 10 cents per share. Instead of getting $12.50 for your
Clayton shares, you get about $12.60. And you had to wait two years ' and
fill out a bunch of forms ' to get the last dime.
Tell me again how this was about the shareholders and not
the attorneys. I no caspisco.
A few weeks ago I referred to Rome and Leningrad as 'famous Greek
cities.' The sentence was intended as satire. Please forgive me if I
ruined your vacation or high school geography exam.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).