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Texas Gal
Chapter Twenty-Eight Owosso?
On Sunday afternoon, the plane returned to take me to Vermont. I'd had an enjoyable Saturday at the ranch, including a long ride on Emily in the morning, and I'd been able to wash my things and get ready for another trip. We had even done a little baking on Saturday afternoon, so I had two cakes for the pilots.
I arrived in Vermont about 7 p.m. local time. Earl was there waiting to take me to the Holiday Inn where I always stayed and, after checking in and taking my things to my room, I went immediately to the restaurant for dinner. Tonight's special was Fresh Scallops and Vegetables. It was delicious.
As always, Earl was waiting for me in the morning. We drove to the plant and I walked to my office, returning greetings as I went. I stopped and talked to Nancy for a few minutes after reaching the executive office suite before walking down the hall to my office.
My first order of business for the day was to make a pot of tea, and then I went through the mail that had accumulated in my absence. It had all been screened, of course, and organized by Nancy. There were a number of trade publications, and a pile of letters from people offering to sell us businesses. There was also a folder of new hires with their pictures attached. I went through the employee pages first, and saw that about a third were from Concord, a third from Danbury, and the rest from Glens Falls, Greenfield, and Brandon. I didn't need Bob to tell me that Concord was stepping up production of paper, or that Danbury was staffing the new second shift. The number from Glens Falls also told me that they were staffing their second shift. One of the forms was for Ed Tivollo, the former owner, to whom I had promised the second shift supervisor position. The positions at Greenfield were to support the increased paper production and warehouse operations. Brandon's new positions were mainly five cafeteria people, with a couple of people in the plant. I studied each of the faces closely and then filed the employment forms in my desk.
Next, I opened the folder of letters from people offering companies for sale and read through each. For the first time, I found that some of the letters were from brokers. Apparently, the articles in the trade publications and newspapers about my buying spree had caught their attention and they were hoping to cash in.
I then separated the letters into two piles. One contained all the offers that held no interest at all. Most of those were from small businesses having less than 20 employees, so I was able to separate them out quickly, and the others were from companies making products that weren't consistent with our marketing such as roofing paper. The other pile contained seven letters that I intended to read through again. After I had done the first separation I finished my tea and took the letters to Nancy so that she could prepare letters thanking the senders but informing them that we didn't have any interest at this time.
I took the elevator to the basement after leaving the folder with Nancy. When I reached the new cafeteria at the back of the building, I was pleasantly surprised to see that it looked ready to open. The only thing missing seemed to be the food. The tunnel also looked finished. I opened the door and walked beneath the yard that separated the office building from the plant complex, arriving at another set of doors at the other end. I passed through the door and climbed the stairs to find myself in Plant Building #1.
As long as I was here, I decided that I might as well take a walk through the two plants and the warehouse. Everything was moving at full speed, and the loading dock was full and all eight trucks were being loaded. Forklifts were zipping around like wind swept leaves in the New England fall. I stayed well out of the way out of fear of being run over. Mike Turbill spotted me standing there and came over.
"Hi, DD. Looking for me?"
"Hi, Mike. No, I was just taking a little walk through the plant. How's everything?"
"Great. My boys and girls are really moving the stuff through. It's hard to believe that last summer we were all sure that we were about to lose our jobs. This year the town is prosperous again and people are happy."
"I'm glad that I could be a part of it. I guess that I'd better get back to work now. I'll see you later Mike."
"Okay, DD."
I returned to my office and picked up the remaining offers to read through them a second time. I didn't really intend to buy anything for a while, but it was always good to know what was available or being sold.
The first business offered was a plant that didn't make its own paper, but rather purchased rolls of paper to make stationary items including notepads, notebooks, drawing pads, address books, diaries, ledgers, envelopes, and stationary. The second letter was from a plant that produced newsprint paper. The third was from a company that made paper plates and straws. The fourth made paper towels and toilet tissue. The fifth produced newsprint. The sixth made poster-board and matting board. The seventh and last was actually an offer for a company with a sawmill and three paper plants located in Michigan and Wisconsin.
I took the letter from the poster-board company and started a new reject pile. I added the letter from the company that made paper plates and straws to that pile. I thought about the stationary manufacturer. We had a lot of excess capacity right now and this might be a possible way to use some of it, so I put that letter in the 'more consideration' pile. I added the company that made paper towels and toilet tissue to the reject pile. That left the two newsprint mills and the company with three plants. I really didn't think that we wanted to get into the newsprint part of the business at this time so I added the two letters to the reject pile. I sat back and read the seventh letter again. It had been sent by the parent company's comptroller.
McGruder Ship Works owned the sawmill and paper plants. The parent company was principally situated in the shipbuilding and steel industries. It had acquired the mills in a leveraged buyout of a shipbuilding competitor last year and was looking to divest itself of the company and retire part of the debt. The asking price for the three plants, sawmill, and timberland was 30 million dollars. The timberland was listed as being 244,000 acres of pine and various hardwoods. If the plants were in good condition and the timberland hadn't been cleared, or destroyed by poor land management, it could be a good deal. Assuming that the land and the sawmill were worth 15 million, that would mean that the three plants would average 5 million each.
My concentration was interrupted by the phone ringing. It turned out to be Nancy calling to tell me that she had the other letters ready. I had her bring them in, signed them, and gave her the other five to do. I kept the offers from the stationary manufacturer and McGruder.
After Nancy left, I read the offer for the stationary manufacturer again. The name of the company was South Shore School Supplies and was located in Bridgeport, Connecticut; just 25 miles from the Danbury plant, as the crow flies.
I suddenly realized that I was doing it again. I was getting caught up in a buying frenzy. Well… maybe not a frenzy, but I was definitely getting caught up in the mood. I had come here to work on the picnic and I hadn't even done a single task yet. It was good that I had set all the wheels in motion weeks ago. My only real job now was to check on everything and make sure that people were doing what they were supposed to, so I reached for the phone and called Bill Marshall. "Hi Bill, it's DD."
"Hi, DD. Welcome back. I heard that you were in today."
"Thanks, Bill. Are you real busy?"
"Never too busy for you, boss. What's up?"
"I'd like you to do a little quiet investigating for me. I want to get whatever information you can on South Shore School Supplies in Bridgeport Connecticut, and Owosso Paper in Owosso, Michigan."
"Sure thing, DD. I think that I heard something about Owosso recently but it doesn't come to mind right now. It'll come back. In the meantime I'll see what I can learn about these companies. Thinking of doing a little buying?"
"Possibly. South Shore isn't a paper producer so they could help us reduce our excess capacity. Owosso might be dead end. The price tag is pretty steep, but let's do the investigation anyway."
"Okay, DD. I'll get back to you as soon as I know something."
After I had hung up the phone, I got out my picnic notes and began making calls to confirm the arrangements. I spent several hours on the phone and was satisfied that everything was coming together for the Saturday affair. The weather bureau was even predicting a nice day.
Bill called me back about 4 o'clock to see if I was free. I told him to come on over. Since he was right next door, he walked into my office a couple of minutes later.
"Here's what I've got on those two companies. South Shore has been in business for 25 years. They originally began as a retailer of school supplies, hence the name. The company was founded by a soldier that had just returned from World War II. He retired from the company this year and the company has declined quickly, losing part of their market to the former sales manager that left at the same time and started his own small company."
"Who owns the company now? The letter was sent by a broker."
"It was bought by a management company that is owned by another management company. The officer names are the same for both companies."
"That's unusual, isn't it?"
"Not really. It might have been purchased because the price was low and they figured that they could get a quick return on their investment. The multiple company thing is usually done for tax reasons."
"Is that all?"
"So far. The other company is much more visible. They have three paper plants, each with pulp operations and one with chipping, and a sawmill that sells lumber and plywood in addition to producing the chips for the other two paper plants. Their land holdings are extensive. They have a good reputation for careful land management, conservation, and replanting. They have about 400 employees and it seems like a solid company. They were acquired eleven years ago by Great Lakes Shipbuilding, that was bought out this past year by McGruder Ship Works."
"That agrees with what was said in the letter that I received."
"You said on the phone that the price tag is steep. I can believe it. I remembered what it was that I heard about Owosso. It was reported in the trade papers back in April that Alliance Paper tendered an offer of 20 million dollars. McGruder immediately rejected it. There haven't been any other offers that I can remember reading about since then."
"I guess that the only way that we can really assess the value is to visit them. Too bad Bob is away on vacation."
"He said that he'll be back on Friday so that he could be at the picnic."
"That'll work out. We could fly out next week. It'll take at least two days to see everything, maybe three. Let's plan on Tuesday through Thursday. I'll contact the seller to make the arrangements."
"Okay. Who else will be coming?'
"John, for one. Would you like Ron along to help out?"
"It might be a good idea, given the size of the company."
"Okay, you speak to Ron and I'll talk to John and Bob."
"Right, anything else?"
"I'll set up an appointment for this week to go take a look at South Shore. You, John, and me should be enough."
"What's the asking price?"
"Five million. They didn't send any information on sales so we won't know anything until we get there."
"Okay."
Bill left and I reread the letters again before calling Nancy and asking her to contact the companies. A few minutes later she called to say that she had a Mr. Phipps on the phone. He was the broker that had sent the letter about South Shore.
I spoke to Mr. Phipps for several minutes. He agreed to show us the plant on Wednesday morning, and gave me directions to the plant.
Next I spoke with a Mr. Ghosh, at McGruder. He agreed to our visiting the plants, sawmill and timberlands next week. He said that the managers at each location would be expecting us, and would show us anything that we wished to see. I thanked him and told him that I would be in touch following our visit.
Having completed all of my tasks, I took the latest trade magazines that had arrived and I went over to the couch. Making myself comfortable, I read until almost 6 p.m.
I had never been in the plant during the second shift, so I walked over there, stopping to let Earl know that I'd be ready to leave in about twenty minutes.
The activity during the early part of the second shift was as intense as for the first shift. Both plants were operating, but the loading dock was empty. I walked around the deserted warehouse but didn't find anyone, so I walked back to the office building and told Earl that I was ready to leave.
There wasn't much to do on Tuesday, so I spent most of the day reading. I spoke to John Fahey and told him about the trip on Wednesday. He said that he'd be ready. Since the plane had left after dropping me off, we would travel in the limo.
John and Bill met me in the Holiday Inn lobby at 8 a.m. on Wednesday. Earl was already waiting with the limo so we climbed in and headed south for the almost three hour drive.
We arrived at South Shore just before 11 o'clock. Mr. Phipps was waiting in front for us. After introductions and greetings, he took us inside. We viewed the office area first. I noticed that most of the desks were not occupied, and it appeared that they were not regularly being used. We left Bill to look at the company records while John and I were taken on a tour of the factory.
John was permitted to look anywhere that he wanted to. There wasn't any attempt to hide anything, as far as I could see, and I was immediately aware that the equipment was very old. Where Danbury's major equipment had been upgraded in the three years prior to our purchase, the equipment here appeared to be twenty or thirty years old, and some things were much older such as manually operated hole punching machines. Although old, it all appeared to be in working condition, but that was John's department so I would wait to hear from him. In addition to the plant, there were 5 trucks owned by the company that would be included in the deal.
At the end of the tour, Mr. Phipps said, "Well, Miss Drake, what do you think of our plant?"
"My first impression is that the equipment is quite old, Mr. Phipps."
"But all in good working condition, Miss Drake."
"That may be, Mr. Phipps. What are the gross and net sales of the company?"
Mr. Phipps opened his notebook and scanned the page. "For the current fiscal year, ending in September, we're projecting sales of 3.87 million and a net profit of $1,187,000."
"And you're only looking for 5 million dollars. Why don't you just keep the business and run it yourself?"
"We just buy and sell businesses, Miss Drake. We don't want to operate them. We prefer to leave that to professionals such as yourself."
"I've heard that the business is in serious decline since the former owner left."
"Just one more example of what I was saying. We don't operate businesses. With your firm hand on the tiller, I'm sure that you can restore this business to where it was at the end of last year. It can be a gold mine for the right person such as you. I've read all those accounts of how you've rescued failing businesses. This one has only just started to decline. It still offers a huge yearly return on your investment."
"I'd like to speak to my VP of Finance before I commit myself either way."
"Of course. Of course. Let's head back to the office to see if he's completed his review."
Bill was standing at a file cabinet, looking through folders when we returned to the offices.
"Hi Bill. Have you completed your basic audit?"
"Yes. I was just looking through some of the individual accounts."
"How does it look?"
"Could we speak in private?" Bill asked me.
"Mr. Phipps, would you excuse us for five minutes please while we confer?"
"Of course. I have a couple of calls to make. I'll be back in five."
After he left, I said to Bill, "Give me the bad news."
"How do you know it's bad?"
"I know that look on your face."
"Oh- well, you're right. The sales that they're reporting are accurate, but what they didn't say is that they're extending credit to every bad risk that's asked for it. I doubt if they'll collect 25 percent of the money that they're claiming will be net profit. Most of the accounts receivable are more than 180 days past due."
"That doesn't sound good."
"They also have accounts payable in excess of one million dollars. Most of it to South-Core."
"That's interesting. Is that all?"
"Isn't that enough?"
"I guess. John, what about the equipment?"
"It's ancient. It seems to be working okay right now, but I don't know where they're getting the parts. They must be having them made by a machinist because the companies that made most of it are long out of business. I would venture a guess that the plant was cobbled together from equipment purchased used, rather than new."
"It doesn't sound like the ideal situation that Mr. Phipps paints, does it?"
"Anything but," John said.
Mr. Phipps stuck his head into the room where we were and said, "Is it all right to come in?"
"Yes, Mr. Phipps, come in."
"Well, Miss Drake, do we have a deal?"
"I'm afraid that our consensus is, that the plant is overpriced."
"Well- I'm willing to consider a counter offer."
"But I'm not willing to make one. You see, I don't believe that this company is worth more than a million."
"Is that a firm offer?"
"No, Mr. Phipps, I'm sorry. Your equipment is so old that parts aren't available. I don't know how you've managed to keep it working. You owe more than a million dollars in accounts payable, and it's doubtful that you'll ever collect most of your accounts receivable."
"You certainly don't pull your punches, do you, Miss Drake."
Smiling, I said, "I have a tendency to shoot from the hip when someone is trying to sell me a ten dollar horse for a hundred dollars."
Mr. Phipps laughed. "That's right, I forgot that you were from Texas. An interesting phrase, Miss Drake." Looking at me soberly, he said, "I'll concede that 5 million might be an exaggerated position. Is there any number that you would like to throw out? Any number at all?"
"Let me think about it, Mr. Phipps. If I decide to make an offer, I'll be in touch."
"Very well, Miss Drake. I'll look forward to hearing from you once you've had an opportunity to think things over. Thank you for coming down."
"Good-bye, Mr. Phipps."
"Good-bye."
We walked out and climbed into the car. As Earl drove out of the lot, I said, "Well, I guess that this was a wasted trip."
"I got the impression," Bill said, "that if you had offered $100,000, he would have taken it."
"That's why I was careful not to make any offers, even in jest. I had the same impression. John what value would you place on the equipment?"
"That's a tough call, DD. If it were being sold at auction, I'd say that you could probably pick it all up for $10,000. To replace it all with brand new equipment would probably run about 4 or 5 million. Of course the new equipment would produce twenty times as much with the same amount of labor, so you would reduce your payroll costs significantly."
"So, say 10 thousand for the equipment, and a million for the plant and land, less the million in accounts payables, makes the value 10 thousand. That's a very long way from the asking price. I think that it's best to pass this one by. Even if it would have been nice to have a ready made outlet for our paper."
We continued to talk about the plant all the way back, even though I considered the deal dead. Earl dropped John and Bill off at the Holiday Inn so that they could get their cars and then we went to the plant. I sat down and wrote a report about the trip to Bridgeport, including as much of the conversation with Mr. Phipps as I could remember.
I dedicated Thursday and Friday to working solely on the picnic. The tent was erected on Thursday and the tables and chairs were set up inside. Carpenters also erected the two small stages that the bands would use.
On Friday, the barbecue pit was set up using concrete blocks, and a portable bathroom company dropped off twenty units. The amusement company arrived late in the afternoon to set up their rides.
Mother, Auntie, Susan, Judy, Mary, and Grandma arrived at the Holiday Inn around dinnertime. I had reserved another 2-bedroom suite and we ate dinner together in the dining room.
The food preparation people must have arrived in the wee hours of the morning because they had made a lot of progress by the time that I arrived at 7 a.m. I wanted to be there early, so I left before the others were awake. I sent Earl back to wait for them after he dropped me off. The picnic wasn't scheduled to start until 10 a.m.
We had given out over three thousand tickets for admittance to the picnic area, so we had based our food and beverage order on that number. A few people arrived early and were allowed to enter the picnic area but they were told that food and beverages would not be available until 10 and that they mustn't annoy the food service people before then.
A little before 10 o'clock cars began to arrive in a steady stream. We had set aside a parking area just outside the picnic area and we hoped that, with the regular parking lot, it would be enough.
By 11 o'clock the grounds were crowded with picnickers. Hotdogs, hamburgers, and chili were being dispensed, along with soda, and beer. The kiddy rides had long lines of children and parents, and the magicians and the clown were busy working among the crowds. The bands had both arrived and were alternating in half-hour sets. People had brought their sports equipment and a softball game was going in one makeshift ballpark, with a baseball game in the other.
My family arrived around 11:30 and I was called to the gate because of a minor problem. I hadn't gotten tickets for them and I had forgotten to tell the ticket takers to admit them. I apologized for my mistake and was forgiven.
A little after 12:30, the food service people began to carve the side of beef that had been cooking over the special pit. Corn on the cob, green beans, and biscuits were also served at that time. Of course, chili, hot dogs, and hamburgers would be available until 3 p.m. and beverages until 4.
Employees had tended to sit and eat with co-workers but I saw a lot of mingling occurring on the food and beverage lines. I had hoped that the picnic would give them a sense of all belonging to the same company.
I spent a lot of time with my family but I spent a lot of time mingling with the employees and their families. Bob Warren showed up with his family, and after they had eaten, I broke the news about the trip to Michigan. Bob was surprised that I was considering something so far afield, but I assured him that Brandon was the permanent headquarters for the division.
The picnic area started to clear after 3 o'clock as people began to leave. A lot of people stopped by the table, where I sat with my family, to thank me for a nice picnic. I was relieved that everything had gone so well. It had been nice meeting the families of our employees.
At four o'clock, the cleaning people showed up to clean the grounds and remove the trash. Everything was neat and orderly by 5 p.m. when I left.
We returned to the hotel and gathered in my suite.
"It was a very nice picnic, dear," Mother said. "You had a terrific turnout."
"Yes, Darla Anne, it was very nice," Grandma said. "Did you accomplish your goal?"
"I don't know. Only time will tell, I guess. But it's a start. Having met the other employees, they know for sure that they're part of a larger company now."
"Have you purchased any more new companies this week?" Susan asked sarcastically.
I smiled. "No, I didn't."
"Too busy with the picnic, huh?"
"No, as a matter of fact I went to look at one called South Shore on Wednesday, but it wasn't a good investment. The equipment was too old, and the finances were in a mess. There's another one that I'm going to see next week. As a matter of fact I wanted to speak to you," I said turning to face Grandma, "about it, Grandma. Are you familiar with Owosso Paper?"
"They're in Wisconsin or Michigan, aren't they?"
"Both. They have three paper plants, a sawmill, and 244,000 acres of timberland. The company is being offered at 30 million. It was reported that Alliance offered 20 million a few months ago, and the offer was rejected."
"30 million dollars is a lot of money, sweetheart," Grandma said.
"I know, and I was a little reluctant to even consider it at first, but I decided that it wouldn't hurt to look."
"It is a lot of land. I wonder if it's been properly taken care of?"
"I don't know for sure but the talk is that they're very careful land managers. We'll see next week."
"When are you going?"
"I made the appointment for Tuesday. I'd planned to go out to Michigan on Monday night so that we can start early in the morning."
"That works out well. We wanted to get a tour of one of your plants before we left. We'll stay until Monday afternoon and then we can drop you off when we return to Texas. I'll send the plane back for you on Tuesday."
"Okay, Grandma. It'll be a little crowded going out, though. I'm taking Bob, Bill, John Fahey, and Ron Collins along."
"I don't think that I know Mr. Fahey or Mr. Collins."
"John is my Chief Engineer. I have great faith in his judgment when it comes to the condition of equipment. Ron was Bill's selection to replace him when he left. After Bill decided to stay I appointed Ron to manage Danbury during the transition. He's done a good job for us. I appointed him to be the Director of Accounting at headquarters after I promoted Bill to VP."
"That only makes eleven of us. Everyone will have a seat and we'll have space for three more, so it won't be a problem."
"It's less than two hours anyway. There's an airport right in Owosso."
"Okay. I'll have the pilots check to make sure that the runway is long enough. Now tell me about your inspection tour of the textile division. I read the reports but you didn't offer very many suggestions for halting the decline."
"Except for the soil problems on the farms, I couldn't find any valid reasons for the decline. I would have to assume that the problem is with management. Productivity seems to be at the root of the problem."
We continued to talk about my inspection tour until it was time to go to bed.
Sunday was a day of rest. We hung around the pool in the morning and went for a ride in the afternoon. Grandma chose to stay at the hotel and work on some paperwork that she had brought along. As we drove through the beautiful Vermont countryside, Judy spotted a waterfall and I asked Earl to stop. We dug into the ice chest full of drinks that we had brought along and enjoyed a cold drink as we dipped our feet in the clear, warm water of a large pool at the base of the small waterfall along a country road.
We returned to the Holiday Inn at dinnertime and enjoyed another fine meal in their restaurant. Mother was satisfied that I was at least eating properly and well.
On Monday morning, all seven of us climbed into the limo again for the ride to the plant.
As we entered the plant grounds, Judy said, "That security guard just saluted. What kind of place are you running here, Darla Anne?"
"Just a regular paper plant. I never told them to salute. They've been doing that on their own since they were hired. They all do it."
"All?"
"Yes, there are seven guards since we operate around the clock, 7 days a week. One shift is only for the pulping operation."
"Pulping?" Judy said.
"I'll explain it on the tour where it will make more sense."
Earl dropped us off in front of the building and we went up to my office. Everyone was impressed with my large office.
Grandma said, "This is really nice, Darla Anne. It's even nicer than my office in Portland."
"I didn't have anything to do with it Grandma. This was the president's office when I bought the plant. Matt must have designed it. Anyone want tea?"
I brewed a pot of tea and we talked about Brandon. Susan explained how we had developed the master plan, and I showed everyone the employee photo file that I had instituted.
"This is a wonderful idea, Darla Anne," Grandma said. "I'm going to consider setting it up in the other divisions."
"All the employees were issued an ID card also. We're going to allow them to charge their meals in the new cafeteria."
"When does that open?"
"It's almost ready to go. I have to speak to Bob about setting an open date. We'll stop by there on the tour. Is everyone ready to go?"
Everyone nodded and we began our tour starting with the office building. We finished the office building tour at the new cafeteria. Susan was just as impressed as everyone else was by the cafeteria. They were even more impressed when we walked through the new, brightly lit tunnel.
For the tour of the plant we started at the pulping operation of plant one. I showed them and explained, step by step, how wood and cloth is turned into paper. By the time that we reached the end of the paper-forming machine, and they saw the enormous roll that was being wound with new paper, I could see that they were amazed. Except Susan, that is.
** image paper roll 1 **
We only took a quick walk through the second plant since they had already seen the same operation in plant one, and we finished up on the loading dock where the crew was working to load eight trucks and two railroad cars. After that we retraced our route back to the office building.
I made another pot of tea and we sat in my office and talked about the plant and the company until almost noon. I suggested that we visit the Bed and Breakfast for lunch, and everyone agreed, so I made a call to let them know that seven were coming and we left.
When we returned after lunch, I got out at the plant and everyone else went back to the hotel to pack for the return trip home. I still had a few things to take care of before we left. My first task was to call Bob. He came right over.
"Great picnic, DD. The family had a great time."
"I'm glad, Bob. I think that it was a success."
"It definitely was. People are already talking about next year's picnic."
I smiled. "Good. Next year we'll set up a small committee to organize it. Bob, I'd like you to do something right away. I'd like you to call our bank and find out what our maximum line of credit is."
"I don't have to call. It's twenty million."
"I'd like to find out if they'll increase it to thirty million."
"For Owosso?"
"Yes. I want to know just how high we can go in our bidding."
"Okay. I'll call right away. They may not be able to answer us today. We're talking about a lot of money."
"We have several days before we'll need the answer. If they decide no, we may have to get creative in our financing. I'm assuming that Owosso will turn out to be a good deal since Alliance made an offer, but it could be academic."
"I'll take care of it. Are we still on for a five p.m. departure?"
"Yes. I'll be leaving at three and we'll meet at the airport."
"Okay. Bill, John, and Ron will drive to the airport with me."
"I'll see you there."
After Bob left I called Eric at Greenfield. "Hi Eric."
"Hi, DD. The picnic was great. Everyone's talking about what a good time they had."
"Good. What's the status of the grounds?"
"The rides were gone Saturday night. They came and took down the tent today, and took away the tables and chairs. The garbage was all hauled away and the grounds are clear except for the barbecue pit and the band stages."
"The carpenters will be by in the next couple of days to remove the stages, and the concrete blocks can remain for the next time."
"Okay, DD."
"That's all I wanted to know, Eric. Thanks."
"You're welcome, DD."
I went through the small amount of mail that had accumulated during the past few days while I was occupied with the picnic and then started getting ready for my trip.
A little before 3 o'clock I called Earl to bring the car around and I left, saying goodnight to Nancy on my way out.
Arriving at the hotel, I packed my bags for the three-day trip and then went looking for the family. I found them sitting at a table on the lawn out in back of the hotel. I joined them and ordered an iced tea when the waiter came around. We sat there and talked until it was time to leave for the plane.
As we checked out I told the manager that I'd be back on Thursday, but would only need my normal room. The bellboy rolled the cart full out suitcases out to the limo and Earl stowed them in the trunk.
We arrived at the airport just minutes ahead of Bob and the others. The copilot struggled to fit all the bags into the hold, but with careful rearranging, he got them all in.
We settled into our seats aboard the plane and prepared for takeoff. Once we were airborne, Mary and Judy made some coffee and tea in the small galley just behind the cockpit. I usually traveled alone, so this was a refreshing break for me. It seemed like we had only reached altitude, when we started to descend. I had completely lost track of time.
I kissed and hugged my family goodbye as I got off the plane. The copilot already had our suitcases on the tarmac by the time that I got there. Having traveled so much in recent weeks, he was as able to identify my cases without problem. The copilot sealed the hold and boarded the plane, pulling the door closed. A few minutes later, the plane began to taxi out as I waved.
The limo that I had made arrangements for wasn't there so John went to the snack bar to call the limo service's number. He returned a few minutes later and said, "There's no answer. I let it ring ten times."
"Well, we're not early so it should be here. I guess that we should try to call a taxicab. The limo had to come from Flint. I hope that there's a cab company closer."
"I'll go give it try," John said.
While we were waiting, the limo finally showed up. The driver apologized saying that there had been an accident on the highway. He had taken the side roads and gotten stuck behind several farm vehicles. John returned, saying that he had seen the limo drive up before he could call.
The driver loaded the suitcases and we were finally on the way to the motel. The motel was a far cry from the Holiday Inn, but my room was clean. When we had checked in, we had asked the manager if he could recommend a good restaurant. He said that there was a great steak place about a mile down the road, so after putting our suitcases in our rooms, we had the limo driver take us there.
'The Beef Pit' didn't appear to be the kind of place that would rate more than 1 star, but not being familiar with the area, we had to trust the motel manager's recommendation. The peanut shells on the floor were indicative of the atmosphere, but the food was surprisingly good. I ordered my steak very rare, and I didn't need a chainsaw to cut it. Always a good sign.
The meal turned out to be quite decent. Afterwards, we sat at the table and talked shop for about an hour before returning to the motel.
The limo driver was waiting for us in the morning. We stopped at a diner for a light breakfast before going to the headquarters of Owosso Paper.
As we entered the Owosso building, the company president, Gerard Deveraux, and his executive vice-president, Peter Emos, greeted us. Mr. Deveraux invited us into his office and his secretary took orders for beverages. As usual, John and I ordered tea while everyone else ordered coffee.
Over the next hour we fired questions at Mr. Deveraux, about the company. He sometimes deferred to Mr. Emos for the answer. From what we were told, the company seemed to be on solid financial ground. Mr. Deveraux gave us each a set of statements for the last fiscal year and the numbers bore out what he said.
When we had covered the basics with the two executives, I asked if Bill and Ron could begin their audit in the accounting department. Mr Deveraux had Mr. Emos take them there, while Bob, John, and I went with him to the plant. We let John set the speed of our progress through the plant as Bob and I looked on and talked with Mr. Deveraux. After an hour I got the impression that Mr. Deveraux was getting a little antsy, but he denied it and said that he'd prefer to stay when I told him that we could carry on alone.
We didn't complete the inspection until after noon. I invited Mr. Deveraux to have lunch with us and he accepted. Bob and Ron were deeply involved and asked that something be brought back for them rather than joining us.
I let Mr. Deveraux give instructions to the limo driver and we were taken to a very nice restaurant only about a mile away. The menu was quite complete and the food was delicious. I was sure that I would remember this place if I visited out here again. We talked shop as we enjoyed the fine cuisine.
"Thank you for spending so much time with us," I said to Mr. Deveraux. "You must be tired of having strangers tramping through your plants, examining everything with a microscope."
"No, I haven't minded. You're actually only the second group to come through since the company was put on the block last year. I guess that there aren't very many companies out there with millions of dollars available to tie up in land that just sits there. Big companies only seem willing, right now, to buy large tracts of land for housing or amusements parks. Neither is in much demand up here. Alliance International was the only other one to express an interest. They came through back in March."
"I read that they made an offer for the company."
"Yes, but the management at McGruder didn't feel that it was adequate so they turned it down. I think that they were very surprised when Alliance failed to make a second offer. If Alliance came back right now, with the same offer, I think that they'd fall over each other jumping at it. The ship building business has been very slow this year, and the boys at McGruder would like to get the cash for the company to make their year end statements look better. I think that if they had it to do over, right now, they'd never pass on the deal. I read that Piermont has three plants now?"
"Three paper producing plants, each with two paper-forming machines, and pulp operations. We also have a boxing operation at one plant, and we're setting up a bag making operation at our newest acquisition."
"Concord?"
"Yes. We have two other plants in the division, as well. One, in New York, makes cardboard boxes, and the other, in Danbury, Connecticut, prints custom business forms."
"Then if you buy Owosso, you would be doubling your number of paper plants. You don't own any land or sawmills though?"
"No. We sold 150,000 acres to our parent company, Ameri-Moore, early this year. It enabled us to clear most of our debt from the books, which in turn enabled us to buy Concord."
"If you buy Owosso, would you sell off the land and the sawmill?"
"If anything, it would be transferred to the Lumber Products division of Ameri-Moore. Technically it would be a sale to ourselves."
"Didn't I read that you're also a Vice-President of Ameri-Moore?"
"Yes, but except for a three week inspection tour of the Textile division last month, I've been dedicating all my time to the Paper Producing Division. I bought the first paper plant on my own authority, and Mrs. Moore decided that I should take responsibility for the new division."
After lunch we returned to the headquarters building. I brought the food to Bill and Ron, and then joined Bob and Mr. Deveraux in his office. We mapped out our itinerary for the next couple of days. Mr. Deveraux gave us a map that identified all of the timberland locations, and an inventory of each location. It was still fairly early so I asked if we could borrow a jeep to begin looking over the land. Mr. Deveraux offered to take us himself, so we followed him out. I stopped to tell Bill and Ron that we were going, and that the limo would be outside waiting for them whenever they were ready.
We reached the first location in about 30 minutes. The trees there had been harvested within the past five years and the land had been replanted. I asked Mr. Deveraux to stop and I took a walk into the area. I saw no signs of serious soil erosion. It was obvious that the company management cared about the land.
We continued to visit timberland locations until it was dark. In each case the inventory appeared to agree with what we found at the location deepening my confidence in the company management. There were only two timberland locations left in Michigan that we didn't get to tonight because they were the furthest two from the plant.
It took almost two hours to get back to the plant and it was almost ten o'clock when we arrived. I invited Mr. Deveraux to have dinner with us but he asked for a rain check, saying that his wife was going to kill him as it was. We asked him to drop us off at the same restaurant where we had eaten lunch, if they were still open. He said that they served until eleven o'clock, and brought us there. We thanked him and said goodnight.
As at lunch the food was excellent. After eating we called a taxi to bring us back to the motel. As Bob and John went to their rooms, I found a note on my door informing me that the plane was back and that the pilots had checked into the hotel. I stopped by their room to tell them that we wanted to leave at eight a.m., and I gave them a copy of the itinerary. Then I went to Bill's room.
"Hi Bill, How's it going?"
"Just fine, DD. How was your tour?"
"Good. Nothing out of place yet. Everything that we've been told seems to be true."
"Same here. We'll continue tomorrow, but so far, no red flags."
"Good. How was your lunch?"
"Great. Ron and I went to that same restaurant for dinner. I'm glad that you had the limo driver bring you. He remembered the way. "
"Bob, John, and I just came from there ourselves. We'll be leaving in the morning. We're going to fly over to Wisconsin to start doing the inspections of the other two plants and the sawmill. Do you need anything before we go?"
"Nope. Everything's fine. Will you be back tomorrow night?"
"I doubt it. We'll probably find a motel over there and then come back on Thursday night if we get everything done. I'll call you if we get delayed and have to take another day. To speed things up. I'm going to let John do the plant inspections while Bob and I do the sawmill and timberlands."
"Okay, DD. I'll see you on Thursday night or Friday."
"Okay, Bill, Goodnight."
At 9 a.m. we were landing in Merrill, Wisconsin. Mr. Deveraux had arranged for a car to pick us up and take us to the plant. We talked briefly with the plant manager, and then went on a quick tour of the plant. We left John at the pulping operation, examining each piece of equipment in minute detail, and just took a walk through to get a general feel for the plant. John would have detailed notes for us later. After we had toured the entire plant, we thanked the manager and asked about the jeep that Mr. Deveraux arranged.
Ten minutes later we were being driven to the sawmill; a twenty-five minute ride from the paper plant. Bob, having come from the Lumber Division, was well acquainted with sawmills. We looked through the production information together, then did a joint inspection of the mill operation. I was glad that I had chosen to wear jeans and boots today, instead of a skirt, as I had worn yesterday.
The sawmill was in fine condition and easily could have been a part of Ameri-Moore operations. We thanked the mill manager and we left to continue our inspection of the timberlands in this area.
We finished in this area by 2 o'clock and returned to the paper plant to retrieve John and then head for the plane.
The plane ride lasted only 15 minutes. Another driver was waiting for us in a jeep when we landed. There weren't any plants in this area; just timberlands. I asked John if he wanted to come with us or stay with the plane and he chose to remain behind. Bob and I spent the next five hours looking at land and trees.
The next jump with the plane took us near Ladysmith, and the third plant. A motel, that Mr. Deveraux had recommended, was holding rooms for us. It was too late to get diner in the only restaurant, but there was a pizza place still open. They delivered two pies and we ate our fill before turning in.
We followed the same routine of going to the plant first, and then leaving John to do a thorough inspection as Bob and I did a quick walk through of the plant. I told John to get a ride back to the motel when he was through. A plant employee was assigned to drive us to the timberland locations and we spent the next ten hours looking at land and trees.
We got back to the motel around nine p.m. The employee who had driven us assured me that he would be paid for his time, but I gave him ten dollars anyway to thank him for skipping lunch and spending the extra time without complaining. Since he was only making $1.80 an hour, it was like getting time and a half pay for the day.
John thought that we might be getting back late, so he had purchased dinners for us before the restaurant closed for the night. He had gotten food that could be served cold, so we each got a chef's salad and salami sandwich. The chef's salad was enough for me so I gave the sandwich to Bob, who was famished by this time.
We had several more timberland locations in Wisconsin to visit, plus two still left in Michigan, so we flew first to the airport nearest the three in Wisconsin, met a representative from the logging operation, and were taken around to the sites. By noon we were finished and flying to Michigan. By three o'clock we were done with all the sites, and headed for Owosso to pick up Bill and Ron. I had called the motel before we left the last airport, and they'd said that they'd be ready.
The inventory of the timberlands that Mr. Deveraux had provided, had been accurate in every case, except for minor differences in sites that were currently being harvested. That was to be expected, of course, since the inventories were dated a month earlier.
Bill and Ron boarded when we stopped in Owosso. After the co-pilot stowed their luggage, we took off for Vermont. I would have liked to have gone to see Mr. Deveraux to thank him for his courtesies, but I was beat and it was getting late. I would have to settle for a thank you call on Monday.
Once we had all settled in with the beverage of our choice, I said, "Okay, let's discuss what we found. Bill?"
"Everything looks solid. Accounts payable are current. Accounts receivable are normal. Record keeping is very good. No hint that there was anything funny going on, or anything being hidden. In brief, a well managed accounting operation."
"Good job. Thank you both. John?"
"The equipment is all in good working condition. It's all roughly equivalent in capacity to what we have in Brandon and Greenfield, even though it's a little older. Since the new equipment in Concord is so much faster, we wouldn't be doubling our capacity by adding the three plants. The two Wisconsin plants are making writing and imaging papers from 20 lb. To 130 lb. double thick cover, and the one in Michigan only makes Kraft paper. We should be able to depend on many years of service from the machines without significant refurbishment. They have a good maintenance program in place.
"Thank you, John. Bob?"
"Unlike some of our other projects, they have a solid customer base and good sales. They're like Danbury in that they're profitable from day one. Unfortunately, just the interest on a 30 million-dollar loan will eat almost all the profit that Owosso currently generates. I say currently because I estimate that they are only running at 38 percent of capacity. That means that there is significant opportunity for improvement, making the deal a good one with the right management. The only thing that bothers me is not knowing why Alliance backed out so quickly. Did they find something that we missed, or did they just drop the ball after their offer was rejected?"
"Thank you, Bob. I'm impressed with Owosso's management. They've cared for the land that they've harvested by taking steps to prevent erosion, and replanting quickly. Their resources lists were accurate, and their managers seem very competent. As Bob says, they're profitable from day one. We may not make any money at first, but it won't cost us any money either, while we find ways to increase profitability.
"At lunch the other day I was feeling Mr. Deveraux out. Whether intentionally, or inadvertently, he let it slip that it was his opinion that McGruder would take significantly less than the price being asked. The decision that has to be made is whether or not we should tender an offer for the company.
"The sawmill is in excellent condition, and I estimate that the land is worth almost 15 million dollars by itself. If Mrs. Moore wants to transfer those over to Ameri-Moore and give us the 15 million, that would mean that we would only have to pay the interest on 15 million, although our annual costs would increase because we'd be buying our wood chips. Even so, profitability should jump significantly.
"I know that the final decision is mine, but I'd like to hear your thoughts. Should we buy, or not? Bill?"
"Buy. It's a good deal, even at 30 million."
"Ron?"
"Buy. It's a solid company that will fit in well with Piermont."
"John?"
"Buy. The equipment is solid, with a good engineering staff. They'll keep the lines moving and the paper rolling."
"Bob?"
"Buy. For all of the previous reasons, plus it will grow us with a minimum amount of risk."
"Okay. Thank you all. I like the deal also. One factor that we have to contend with is that we only have a 20 million-dollar line of credit. Bob contacted the bank before we left, to see if they'll raise our line to 30 million, but they haven't responded as yet. Bill, how much can we add from our various accounts?"
"Holding back enough to make sure that we don't risk default on making payments to creditors, I would say, about 3 million. That includes the money being set aside each month for the annual payment for the Danbury note. It will have to be replaced by April. That gives us almost 8 months to come up with it. We'll have another $320,000 when we complete the transfer of the lot by the interstate. That should happen in the next two weeks, so make that 3.3 million."
"Okay… so if we don't get the increase, we'll have 23.3 million. That might be enough."
We continued to talk about the acquisition all the way back to Vermont, but the decision had been made to tender an offer, even if it was significantly less than the asking price."
I stayed in Vermont over the weekend even though I really wanted to go home. What I had to do could be done from home almost as well, but I wanted to be able to easily draw upon the combined knowledge and advice of my team, if needed.
On Monday, I asked Nancy to try to reach Mr. Ghosh at McGruder. Ten minutes later she buzzed and informed me that Mr. Ghosh was on the line.
"Good morning, Mr. Ghosh."
"Good morning, Miss Drake. I understand that you made the trip to Michigan?"
"Yes, I did. I want to thank you for the courtesies that were extended to me and my associates."
"You're very welcome. How can I can help you today?"
"We've completed our evaluation of the paper plants, sawmill, and land and I'm prepared to tender an offer. However, our investigation indicates that the asking price is much higher than our estimate of the actual value in the current market, given the age of the buildings, equipment, and harvested portions of the land."
"Oh? Well… where do you place the value?"
"I'm prepared to purchase the Owosso company and its resources for 18 million."
"Eighteen?"
"Yes."
"Well, I'll present your offer to the board, but I honestly don't think that they'll accept it. They might entertain a lower price but this is extremely low."
"I appreciate that, but the market is very soft right now. There are a number of companies coming on the market. I've purchased five in the past year because of the softening economy, and I get at least twenty offers every month." I didn't tell Mr. Ghosh that most of those offers were from small companies, or companies whose products didn't fit in with our marketing plans.
"Twenty every month?"
"Yes, easily. Although most are single plant operations. This is the first three-plant offer that I've received."
"I had no idea. We occasionally get an offer, but no more than 3 or 4 each year."
"I guess that the ship building industry is better off than the paper industry is right now."
"Perhaps."
"When will you expect to hear from your board? I have to return to school in a week. I won't be back here until the January break."
"I'll pass the information onto the company president as soon as we complete our call. He'll probably have his secretary call each member and let him or her know that we have an offer. After that, it'll be up to them to let the president know of their decision, and he'll let me know. I'll call you as soon as I hear."
"Very well, Mr. Ghosh. I'll be here until Friday afternoon."
"How can I reach you after that?"
"Leave a message and I'll get back to you in January when I return during the mid-semester break."
"Did you say January?"
"Yes. That's the next time that I'll be back."
"Who runs the company in the meantime?"
"My executive vice president, Robert Warren."
"Then I should contact Mr. Warren after this weekend."
"I'm sure that Bob will be happy to talk to you, Mr. Ghosh, but he's not authorized to negotiate the purchase of companies. However, should we reach a satisfactory arrangement before I leave, Mr. Warren is authorized to complete the purchase."
"I really don't know if I can get an answer from the board before Friday."
"Well then, we can talk again next year if we're both still interested."
"Very well, Miss Drake. Goodbye."
"Good-bye, Mr. Ghosh."
I placed the handset down on the cradle and thought about the call. I had firmly planted the suggestion that they weren't likely to get any more offers in the near future. The fact that Alliance hadn't tendered a second bid might reinforce that idea. If McGruder was indeed desperate to sell Owosso in order to raise needed capital, as Mr. Deveraux had indicated, I would hear before Friday. The amount of time that it took them to respond would indicate how desperate they were. That would, in turn, give me a clue as to what my next bid should be. If I gave them as much time to respond as they wanted, I would lose the barometer.
I was in my office the next day when Nancy buzzed me. She said that Mr. Ghosh of McGruder Ship Works was on the line. I thanked her and she connected the line.
"Good morning, Mr. Ghosh. How are you today?"
"Good morning, Miss Drake. I'm just fine. Are you well?"
"Very well, Mr. Ghosh."
"I did some research on you after we talked yesterday. I didn't realize that you were the young girl that uncovered that conspiracy at Ameri-Moore a couple of years ago. I'm sorry."
"I'm not offended Mr. Ghosh. I'm glad that that incident is finally fading away."
"Of course the incident was not as important outside of the lumber industry. I'm sure that it will be remembered much longer in Wood and Paper Products circles. I spoke to Mr. Deveraux this morning. He said that he knew who you were as soon as he heard your name."
"As you say, I'm better known in Wood and Paper Product circles. The Paper Press magazine keeps putting my picture on the cover."
"That would account for part of it."
"I guess. Well, it's been delightful talking to you again, Mr. Ghosh." I figured that my dismissal would bring him to the purpose of the call.
He quickly said, "My pleasure, Miss Drake, but that's not the reason that I'm calling. The board met last night to vote on a new design for a ship, and they considered your bid as well. I'm afraid that they rejected it, but they did authorize me to lower the asking price to 25 million for you. They feel that that's a very generous price, even in a soft market."
"In a strong market perhaps, but not these days. I'm sorry that we couldn't do business, Mr. Ghosh. It's too bad that the board is so intractable."
"They're not intractable. They lowered the price by five million."
"But they had set the price way over the market value in the first place."
"That was the price that the business consultant appraised the business for."
"When was that?"
"When they authorized the purchase of Great Lakes."
"That was in a different market. And the consultant was probably trying to justify the price that Great Lakes was asking in order to help consummate the deal. I bet that, presented with the same offer for Great Lakes in today's economy, they might pass the offer by."
There was silence on the line.
"Mr. Ghosh?"
"I'm here. I was just thinking about the purchase of Great Lakes and the consultant.
I knew now that the information that I had gotten from Mr. Deveraux was accurate. "It's been a pleasure talking with you, Mr. Ghosh."
"Uh- perhaps you could make a counter offer. I could go back to the board and try to make this work."
I didn't say anything.
"Miss Drake?"
"I'm here. I'm sorry, Mr. Ghosh. I was just thinking about the value of the company."
"Would you like me to take a counter offer to the board?"
"No, I don't think so. We really put our best price together before I spoke to you. No, wait. I can possibly go another $500,000. You can tell the board that we'll offer 18.5 million."
"That's not much of an improvement."
"Like I said, we really put our best price together before I called you. We started off at the top because we were so far from what you were asking."
"I don't think that they'll even consider it but I'll take it to them. They're meeting again tonight because they failed to reach agreement on the new ship last night."
"Okay, Mr. Ghosh. Let me know what they decide."
I hung up the phone and thought about my next bid.
Mr. Ghosh called the next day, as I expected.
"I really went to bat for you, Miss Drake. I want to get this matter settled. The board rejected your offer, but I managed to convince them to come down. They agreed to accept 20 million if we can get this get this done in a month."
"A month? It'll take that long just to research the titles on all of the land parcels. We still have to do a complete audit of the books and contact all creditors and customers to verify the amounts."
"I assure you that all of the information in the ledgers is 100 percent accurate. I'd be willing to back that up with a bond."
"Okay. I'll agree to wrap this up in a month if the board will accept 19 million. That's the best that I can do."
"Look, we're only a million apart. The board has already reduced the price by 10 million. Let's wrap this up. Add the million and we can start working on the transfer today."
"But I've already just agreed to come up another $500,000, and that means that I've added a million from what I expected to be my best price. How about you coming down a million and we can start working on the transfer today."
"I can't. The board would skin me alive. Look, how about if we split the difference. Offer me 19.5."
"I can't. I'm reached the absolute top. It's too bad. We were only 500k apart."
"It's amazing that a mere 500k is going to keep us from doing this deal."
"Yes. I'm sorry that it didn't work out. Well, if you still haven't sold it in January and the board is willing to come down the last 500k let me know. If we're still interested, maybe we can get together."
I was prepared at this point to terminate the call and wait to see what happened. If Mr. Ghosh didn't call before Friday, I would call him and offer the $19.5 million. I remembered my father telling me when I was small that the secret to negotiating is never to be too anxious. And never fold when you know that you have the strongest hand. But it wasn't necessary to wait until Friday.
"Okay, look. I'll probably get my head handed to me by the board, but I'll do the deal for 19 million."
"You're sure that you can speak for the board?"
"I'm sure that I can convince them. They have more important matters confronting them and they want to get this out of the way."
"Then we have a deal, Mr. Ghosh. I'll write up a letter of intent today and send it to you by courier. As soon as you sign and return it, we can start working on the formalities and complete the transfer. Mr. Warren will be handling the transfer after this."
"Very good, Miss Drake. It's been a pleasure dealing with you. I see that your reputation is deserved."
"And I've enjoyed dealing with you, Mr. Ghosh. I'm glad that we could reach a compromise. Good-bye."
"Good-bye."
I immediately began drafting the letter of intent, including an attachment listing all of the land parcels. The letter stated that all assets and equipment present at each location on the days that we visited, were included in the purchase. It further stated that a bond would be issued certifying that the accounts and ledgers presented to us during our visit were completely accurate, and that all properties were free of liens and attachments.
Nancy typed the letter for me and then notarized it. I had her send it immediately via courier.
With that done I called Bob and Bill into my office.
When they arrived, I held up my cup of tea and said, "I'm drinking a toast to the newest acquisitions of Piermont paper."
They both just stared at me for a few seconds, then Bob said, "Are you saying that you struck a deal for Owosso?"
"Yes. I just sent the letter of intent via courier."
"We didn't expect it to happen so fast," Bill said.
"I wanted to wrap it up quickly before Alliance got wind that we were interested and forced us into a bidding war. I'm not convinced that they had entirely dropped the idea. They may have only been giving McGruder time to regret refusing their offer."
"How much did they come down?" Bob asked. "It couldn't have been much considering that you closed the deal in two days. We haven't even heard from the bank yet."
"It doesn't matter. We won't need the extra money. We went back and forth for a while, but we settled on nineteen million."
"Nineteen? That's all?" Bill said. "But they were asking thirty. And that's less then the offer from Alliance that they refused."
"We owe a lot to Mr. Deveraux. He dealt me the cards that gave me the strongest hand. It's a shame that he'll have to step down as company president. I hope that he decides to stay with us as a Plant Manager."
"I think that he will," Bill said. "I saw the executive salary schedule. He's not making any more than each of our plant managers, and he's had a lot more responsibility."
"To some people the title is as important as the compensation; sometimes it's more important."
"The new plants are so far away that we should really treat them as a separate region," Bob said. "You could appoint him as Vice-President of the Midwest Region, with Plant Manager responsibility for the plant on Owosso. That way his function wouldn't really change that much and his power base would remain the same. He's done a good job out there from what we've seen, and it would be difficult to manage the various functions as well from back here. He'd be stepping down title wise, but only slightly and he'll be a Vice President in a much larger organization."
"That's an excellent idea, Bob. He can function as Regional Manager, as you do for the Northeast Region, but he'll still report directly to you. Let's keep this organizational plan just between the three of us until I can speak with Mr. Deveraux. I know that the purchase can't be kept quiet, so I won't ask that of you.
"Bob, I told Mr. Ghosh that you'd be handling the transfer now that the negotiations were completed. Get a team busy researching the titles of all the properties to make sure that they're all clear. Also, notify the bank that we won't need the extra money, but that we'll need to arrange for a 19 million-dollar note. I'll need the papers so that I can sign them before I leave on Friday. Part of the deal was that we complete the transfer in a month. That condition was imposed once they started dropping the price. That's when I knew that we had them.
"Bill, you can start drawing up plans to convert Owosso's accounting systems to be compatible with ours, but don't contact them until we get the signed letter of intent.
"We'll also have to start looking at their operations, once we have the signed letter, to see what functions we can consolidate with our own here. Since they have a profitable operation we don't have to move too fast on that.
"I guess that's all on the acquisition for today. We'll discuss the topic at length at the Friday meeting.
"Bob, when is the new cafeteria opening?"
"I thought that we'd have the ribbon cutting on Friday morning before our meeting; say at nine o'clock?"
"Okay, nine o'clock Friday morning. Who'll be there?"
"All managers and supervisors have been invited. Then they can report back to their people that it's open. I expect it to be swamped on Friday while everyone stops by to take a look. I've assigned several extra people to help out on Friday, and then again on Monday. After that things should normalize."
"It sounds like a good plan. Okay… unless there's anything else, I'll let you go to get started on working to bring Owosso into the fold."
After they left I called Mr. Deveraux in Owosso. He was in his office and picked up the phone right away.
"Hello, Mr. Deveraux. I wanted to call you and personally thank you for the courtesies that you extended to me and my team while we were looking over your operations."
"You're most welcome, Miss Drake. It was a pleasure to meet you and have you visit my plant. Mr. Ghosh has told me that you tendered an offer and that the board of McGruder is considering it."
"Actually, we completed the negotiations this morning. I've signed a letter of intent to purchase and forwarded a copy this morning to Mr. Ghosh for his signature."
"I see. I hadn't been apprised of that development yet."
"Mr. Ghosh may be waiting for the letter to arrive before he informs you. I sent it via courier so he'll have it in the morning."
"Is it your intention to operate the company as a wholly owned subsidiary of Piermont?"
"No, the plants will be absorbed into Piermont's existing operations."
"Then you won't be needing a company president."
"No, we won't. That's why I'm calling. We will need a Vice-President of the new Midwest Region though. The duties will be almost exactly what you do now except for various corporate functions that will be handled here in Brandon. The candidate will also function as the plant manager for Owosso, in addition to supervising the other plant managers in the region, and the pay will be a bit higher than your current pay scale. Do you know of anyone that might be interested in the job?"
Mr. Deveraux chuckled. "I might just know of someone. He has the experience that you would be looking for, and happens to live right here in Owosso. I understand that he'll be looking for a new position in the very near future."
"It sounds like he might be the right man for the job. I can't do anything right now, you understand, because I haven't received the letter back from Mr. Ghosh yet, but he should understand that there'll definitely be a place for a man of his experience and abilities."
"Thank you, Miss Drake."
"Thank you, Mr. Deveraux. You were instrumental in helping us to reach certain decisions about Owosso Paper. I was hoping that you would decide to become part of the Piermont team. We'll talk again once the sale is finalized. In the meantime, I'm sure that you'll continue to do the fine job that you've done in the past."
"You can count on it."
"Goodbye, Mr. Deveraux."
"Goodbye, Miss Drake."
I placed the phone back on the cradle with a certain satisfaction. I was happy that Mr. Deveraux would be continuing on. I had been impressed with his management of Owosso.
On Friday, we had the ribbon cutting ceremony for the new cafeteria. Coffee, tea, and soda were to be dispensed free for the day.
We began our regular weekly meeting at 10 o'clock. Last week's meeting had been cancelled because half the members were in Michigan.
I opened with "Good morning, thank you for coming. As you've all heard, I'm sure, we negotiated to acquire Owosso Paper this week. I received the Letter of intent, signed by the Chairman of the Board of McGruder, this morning. Owosso brings with it three paper plants and a sawmill; all operating profitably. One plant is located in Michigan, and the other two, plus the sawmill, are in Wisconsin. We also get 244,000 acres of timberland. About 200,000 acres are available for harvesting, with the other 44,000 acres in some stage of planting or reforestation.
"As has become our practice, we'll refer to the plants by the name of the nearest town or city where they're located. Additionally, because of the distance involved, we're going to divide the plants into regions. Our five existing plants will be part of the Northeast Region, and the 4 new acquisitions will be part of the Midwest Region. I expect that the sawmill will be transferred over to Ameri-Moore's Lumber Products division. They may want the land also. We'll have to see about that. Mr. Gerard Deveraux, who has been the president of Owosso will assume the position of Vice-President of Midwest Operations. His duties will be roughly the same as he has had for the past eight years. His subordinates, who held corporate titles, will be invited to remain in positions of reduced authority, but without any cut in salary.
"As we did with the other acquisitions, certain functions will be transferred to Brandon. We don't have any restrictions on personnel retention but we'll try to find a new position for anyone who is displaced. Only the Owosso plant will be affected since they already had a centralized management.
"Let's get the status reports out of the way and then we can devote the rest of the time to Owosso. Bob, would you like to start?"
"Okay, DD. The new 4-color equipment has been installed and tested in Greenfield. Our operators are trained, and we'll start manufacturing the boxes for the toy company next week. I've terminated the contract with the supplier that we've been using since July 1st. Paper Production down there has gone to a second shift now, and we're planning on adding a third shift to the box making operation.
"The new bag manufacturing operation in Concord will begin production next month. The Kraft paper production is operating at top speed now, on one shift. We've eliminated almost all of the former office space to use it for the manufacture of bags.
"Glens Falls has gone to a second shift and Danbury's second shift continues to eexpand.
"I guess that's about it other than Owosso."
"Thanks, Bob. Bill?"
"Everything is rolling along fine. All of the plants in the Northeast Region are profitable, and the accounting functions have coalesced into one system. You each have a report in front of you."
"Thanks, Bill. Matt?"
"Sales are up again since our last meeting. We just sent out our latest catalog, showing the new bags that we'll be selling. Now it looks like we'll have to develop another new catalog with the products from the Midwest Region."
I smiled. "They have their own sales force right now, so there's no rush. Thanks, Matt. John?"
"Everything's fine. We have the guys at Greenfield learning the new boxing equipment, and the guys at Concord are learning the new bag making equipment as it's installed. Things have settled down and preventative maintenance is keeping any major problems from developing."
"Thanks, John. Ben?"
"Everything is fine. We've prepared employment recalls for Concord as that factory ramps up. Most of our effort has involved finding printing machine operators for Danbury. We've expanded the apprentice training program down there so we can 'grow' our own. Glens Falls never had a second shift, so we've had to begin a training program there as well. Brandon and Greenfield are only requiring normal replacement hiring operations right now.
"Thank you, Ben. Tom?"
"Purchasing has settled down. Our suppliers are happy, and our credit is triple A. I hope that the new acquisition won't affect that."
"It won't. We won't be using any of our operating capital for the purchase. Thanks, Tom. Mike?"
"Everything is fine, DD. Everyone's excited about the new cafeteria. We've gotten all the trucks painted with the Piermont name and logo now. That's all."
"Mike, I was in the plant during the second shift recently. I noticed that there wasn't anyone on the loading dock?"
"We don't need more than one shift. Now that we're using the railroad siding for loading boxcars, we get everything done in one shift. We won't need more bays, after all, and we won't have to go to a second shift on the docks unless the paper production goes to a third shift."
"I see. Thank you, Mike. That covers old business. Is there any new business?"
Ben Philips spoke up. "I don't know if this comes under that category, but I've submitted an application to make my transfer to Brandon, permanent."
"Wonderful, Ben. Welcome to the family."
"Thanks, DD."
"Okay, the moment that you've been waiting for. Owosso, are we getting a gold mine or just the shaft? Anyone want the floor?"
We spent the next hour talking about the acquisition. Bob, Bill, John, and I did most of the talking since we had been there. After an hour, we took a short break, and then returned to talk about it again. We talked through lunch from the B&B, and continued talking more after that.
By 3 o'clock we had pretty much exhausted the topic and stood up. "I want to thank all of you for working so hard this past year. I'll be returning to college next week so I won't be around until mid-semester break in January. As in the past I'll be reading the minutes of each week's minutes, and I'll be in touch with Bob on a regular basis. If any of you need to talk to me, Nancy can get a message to me and I'll call you as soon as I can."
I smiled. "By the time I come back, you'll probably have all the plants running 3 shifts. Have a great Fall season, Happy Thanksgiving, Merry Christmas, and Happy New Year."
Everyone stood up and wished me luck at college as they filed out. Bob stayed behind.
"I have the papers for the note from the bank. The loan committee approved the increase by the way."
"Great. That means that we can still get 11 million more if we need it."
I signed the papers that would get us the certified check for 19 million dollars when we needed it. We wouldn't get it until we were ready to complete the transaction in order to avoid the interest.
I thanked Bob for his hard work, wished him good luck with the acquisition arrangements, and said good-bye. It only took me a few minutes to get ready to leave because I had readied everything yesterday. I called Earl, said goodbye to Nancy and left. A number of people said goodbye to me as I left and I was able to address them all by name as I said goodbye also.
The pilots were in the plane when I arrived and it was warmed up and ready to go. Nancy had called them after I left to notify them that I was on my way. I said goodbye to Earl and thanked him for driving me around as the copilot loaded my luggage. Five minutes later we were airborne.
I looked out the window and watched as the earth fall quickly away. Once we passed through the cloud cover there wasn't anything to see, so I went to the galley and made some tea, then sat down to think. Inevitably my thoughts turned to the recent purchase. Once again I had succumbed the buying fever, and now that it was over, I was like a drug addict coming down from a high.
Grandma always kept so busy, but rarely made any purchases. I had to find out how she did it. When I wasn't in the hunt to buy something, I was bored out of my mind.
(continued in part 29)
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