Kim Lund, a shareholder in 25-store Minnesota supermarket chain Lunds & Byerlys, is battling her brother in court over the amount their family company will pay to buy her out.
Lund is suing her family company, Lunds Inc., and her brother, CEO Russell “Tres” Lund III. “Hennepin County Chief Judge Ivy Bernhardson has already ruled that Lunds must purchase Kim’s interest, but a canyon divides the two sides on the purchase price,”
the
Minneapolis Star Tribune
reported.
Financial advisers for Kim Lund, 57, say her stake is valued at $80.4 million; the company values it at slightly more than $21 million, the article said. The judge will determine the amount Kim Lund will receive, the article said.
Kim Lund, a teacher, told the court that she and her two children plan to use most of the money for philanthropy, the article said.
Tres Lund contends that the company “cannot sustain a large payout and still remain independent and relevant in an increasingly competitive grocery market,” the article said. “The company claims it would have to borrow $76 million to fund a buyout at the price Kim has demanded.”
The siblings’ grandfather, Russell Lund Sr., founded the company in 1939. He and their father, Russell Lund Jr., both died in 1992. Tres and Kim Lund and their siblings Robert and Shauna each own 25% of the company, the
Star Tribune
article said.
“Kim Lund has tried on and off for years to cash out her stake in Lunds Inc. Finally, in late 2014 she sued the company to free her inheritance, as well as to remove Tres Lund as a trustee of the trusts holding much of her stock,” the article said.
Robert and Shauna side with Tres, and Kim testified that she and her children are “excluded from all family events,” the newspaper reported.
Tres Lund doesn’t want to take on a non-family investor, incur debt or raise cash through an alternative to debt, the article said. Tres Lund testified that although the company has a $35 million bank line of credit, it uses cash flow to finance store remodelings and other investments, the report said.
Tres became CEO at age 30 in the early 1990s. In 1997, he bought Byerlys, a competitor, which had 11 stores; at the time, Lund’s had only eight stores, the article said. Today, “Lunds is solidly profitable with annual revenue of about $660 million,” the
Star Tribune
said, citing court records. (Source:
Minneapolis Star Tribune
, Feb. 9, 2017.)
Update:
In an analysis of the case,
Star Tribune
columnist Lee Schafer wrote
, “The owners’ capital in a family business only looks like it doesn’t cost anything…. To figure out how much the equity costs, [family CEOs] have to look at the business with the eyes of any investor who doesn’t happen to be their sister. What kind of annual return would it take for an investor to accept the risk of ownership and then keep that money in the business?” (
Minneapolis Star Tribune
, Feb. 11, 2017.)
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