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Oregon Road Conditions & Cams Email Story to a Friend August 5, 2005 Harry & David plans to go public By GREG STILES Mail Tribune Investors may soon be able to buy a piece of Jackson County’s largest for-profit employer. Harry & David Holdings Inc., formerly Bear Creek Holdings, filed a preliminary document with the Securities and Exchange Commission in Washington Thursday, saying it would seek to raise as much as $125 million through an initial public offering of common stock. The company did not indicate the number of shares or estimate a price range. Those details are customarily disclosed in amended filings. "We’re going to restrict our comments to what’s in the S-1 (SEC filing) and press release," said Bill Ihle, senior vice president of corporate relations. "That’s all we’re going to say for the foreseeable future." The Medford-based company said in an initial prospectus that UBS Investment Bank will be the lead underwriter of the offering, alongside Banc of America Securities LLC and Calyon Securities Inc. Advertisement Harry & David said it intends to list its stock on the New York Stock Exchange under the symbol HND. It said it will use proceeds of the offering to redeem up to $85.8 million in high-interest notes issued in February. The company said it generated sales of $561.8 million, a 7.6 percent gain, in fiscal 2005 that ended March 31. Curt Bennett, a UBS Financial Services broker in Medford, anticipated shares would be priced between $10 and $15. "So there will be a lot of shares," said Bennett, who already has requested shares from the UBS syndicate desk to sell to local clients. "They’re usually pretty good about taking care of the home town," Bennett said. "But I can’t personally guarantee anything." While the company wouldn’t comment on its name change, Harry and David products have long been gift staples exchanged among Wall Street and Fifth Avenue executives in New York. "Harry and David is a name everyone knows from receiving all those pears every Christmas," said Lyn Hennion, a broker with Strand Atkinson Williams & York in Medford. "They don't think of it as Bear Creek, they think of it as Harry and David." In April 2004, equity investor Wasserstein & Co., a New York limited partnership, announced it was purchasing Bear Creek Corp. from Japanese conglomerate Yamanouchi Pharmaceutical for $260 million. The deal closed in June 2004. In February, Wasserstein refinanced its deal by going to the bond market and issuing $245 million in senior unsecured notes and floating-rate notes that were given junk-bond ratings. "It’s a textbook leverage buyout and now this is the second phase where they pay off the debt," said Mark Sosey, a broker with A.G. Edwards & Son in Medford. "They are deleveraging themselves with this offering. If they can get their debt down to 50 percent of total capital, the rating agencies (Moody’s and Standard & Poor’s) could give them an investment-grade rating." Sosey likens companies issuing junk-bond ratings to individuals who have too much credit-card debt and a 90-percent loan- to-value mortgage. "Their credit score is going to be very low," he said. "Any future money lender is going to request a very high interest rate. But if that person all of a sudden inherits money and the debt-to-value goes to 50 percent, they can pay off all their credit cards. Their credit score goes way up and they start getting credit card solicitations in the mail because they are much more credit-worthy." Sosey said the timing is right for an initial public offering because the economy is strong and that’s when Harry and David sales are strongest. The new money will allow the company to pay a dividend, buy back stock or invest in equipment, land or orchards. The process, if it takes a typical path, will take about 90 days before the public can actually obtain shares. Sosey thinks a critical issue will be whether Harry & David Holdings will pay a dividend to stock holders. "It needs something other than pure growth, because it’s a mature industry," Sosey said. "It’s not Google and stocks won’t go unless there is growth, earnings and dividends." The investment banker will pay Harry & David Holdings for the stock and distribute it to a variety of brokerage houses. If there is a heavy demand among investors, the price could go up beyond its initial pricing range. If demand is weak, the offering won’t take place. Reach reporter Greg Stiles at 776-4463 or e-mail Harry & David plans to go public ">[email protected] . A little history Harry and David’s roots go back 120 years, when Bear Creek Orchard was planted. The company was renamed Bear Creek Corp. in 1974, and in 1984 the company was acquired by publicly owned R.J. Reynolds Co. of Winston-Salem, N.C. The parent company became RJR/Nabisco a few months later and was sold to Shaklee Corp. of Oakland, Calif., in 1986. Yamanouchi Pharmaceutical bought the company in 1989. Wasserstein & Co., a New York limited partnership headed by Bruce Wasserstein, purchased Bear Creek Corp. for $260 million in June 2004. Bear Creek Corp. was changed to Harry & David Holdings Inc. (with ampersand) when the company declared its plans to go public Thursday. Perks and pay for execs outlines in SEC filing In its S-1 filing with the Securities and Exchange Commission, Harry & David Holdings Inc. detailed employment agreements with Bill Williams, president and chief executive officer, and Stephen O’Connell, chief financial and administrative officer. Williams earns a base salary of $567,000 and through the company’s annual incentive plan can earn a bonus up to 140 percent of his base salary, with a target bonus of 70 percent or just under $400,000. According to the filing, Williams was due a 70 percent bonus on May 13. He is also eligible for common stock options representing 2.5 percent of the sum of the aggregate number of outstanding shares. Williams’ fringe benefits include: an annual car allowance of $14,400; a comprehensive annual physical examination; financial consulting, tax preparation and planning; social and country club dues and assessments; membership dues and assessments for the Arlington Club in Portland; participation by executive (and his wife, when such event includes spouses) in one national or international education event per year sponsored by the World Presidents’ Organization; and with prior consent of the board, participation in the company’s sabbatical program. He also has an agreement for the company to lend him $250,000 as part of the investment partnership. O’Connell’s base salary is $500,000 with a target bonus of 40 percent that can grow to 80 percent. If his base salary and bonus are less than 75 percent of total cash compensation, including deferred pay, of any other employee other than Williams, his income will be increased to cover the shortfall. (The increase is capped at $900,000.) O’Connell was with Wasserstein prior to joining Bear Creek on Aug. 31, 2004. His compensation included reimbursement for temporary housing, coach airfare for weekend travel to New Jersey or for relocation expenses for his family. The company reimburses O’Connell approximately $5,500 for private school costs. Mail Tribune Home | Local News | Sports | Business | Obituaries | Life | Opinion AP News | Archives | Site Map | Community | Classified Copyright © 1997-2005 Mail Tribune, Inc. All rights reserved. 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