The annual shareholders meeting of Princeton-based Amrep Corp. set for Monday was shaping up to be kind of dull, with only an election of directors on the agenda.
Then, its largest shareholder - a noted local philanthropist and businessman - decided last week to seek to take the company private with a $12-per-share offer.
That should enliven the festivities going on beginning at 9 a.m. at the Conference Center at Normandy Farm in Blue Bell.
Nicholas G. Karabots of Fort Washington wrote a letter dated Sept. 8 to Amrep’s board in which he proposes to acquire the outstanding stock he doesn’t already own. Given that Karabots controls about 60 percent of Amrep, he’s well on his way.
Karabots, 77, made his money as a publisher of puzzle magazines and in real estate. In recent years, he has made news giving some of that money away. He was a major donor in the fund-raising that kept Thomas Eakins’ painting “Gross Clinic” in Philadelphia. He also donated $15 million to Children’s Hospital of Philadelphia.
But he’s still chairman and chief executive officer of Kappa Media Group Inc., a privately held company in Fort Washington. And it’s through publishing that he became involved with Amrep, which distributes magazines and provides fulfillment services to publishers.
In 1993, Amrep acquired the rights to distribute Karabots’ magazines in exchange for 575,593 shares of Amrep common stock, according to the company’s most recent proxy statement. Karabots joined the board. Today, he is Amrep’s vice chairman and owns 3.6 million of the 6.0 million shares outstanding as of July 30.
Karabots outlined several reasons in his letter for why he doesn’t think Amrep should be a public company anymore. He cited “an illiquid trading market” for the stock, the lack of any analyst coverage, and the “substantial costs” of being a public company.
He also noted the company’s “disparate business lines,” which I noticed, too, when I examined how Amrep generated revenue of more than $120 million for the fiscal year ended April 30. Subscription-fulfillment services provided $92 million of revenue, newsstand-distribution services contributed $12.9 million, and product services kicked in $10 million.
The last $5.7 million in revenue came from its real estate operations, which aren’t warehouses that it owns, but residential land in New Mexico. Specifically, Amrep owns 17,340 acres in Rio Rancho, the third-largest city in New Mexico. It has owned land there for more than 40 years.
That mix of businesses gives you a hint of what has been happening to Amrep over the last couple of years as the housing bubble burst and magazine publishers have struggled through an advertising drought. The largest employer in Rio Rancho is Intel Corp., which operates a large semiconductor-manufacturing plant there. That sounds like a license to build lots of houses, and that’s what Amrep had been doing.
Except that Intel has been cutting its workforce in Rio Rancho recently, according to Amrep’s annual report, from 4,700 as of April 30, 2008, to about 3,000 as of April 30.
Overall revenue for Amrep has declined for three straight years since reaching $204.8 million in the fiscal year ended April 30, 2007. It has also lost money during the last two years, dropping $9.5 million, or $1.58 per share, during its most recent fiscal year.
In a statement regarding Karabots’ offer, Amrep said that “no decisions have been made regarding Amrep’s response to the proposal.” It’s impossible to know what Amrep’s chief executive officer thinks about it, because, in another unusual twist, Amrep doesn’t have one.
In fact, Amrep hasn’t had a CEO since January 1996. Instead, the company is run by the board’s three-member executive committee consisting of Edward B. Cloues II, the recently retired chairman and CEO of K-Tron International Inc., of Pitman; Albert V. Russo, a New York commercial real estate investor; and Karabots.
Amrep shares jumped 18 percent the day the company reported Karabots’ offer, closing up $1.85 at $12.09. They rose again Friday closing at $13.00, up 91 cents, or 7.53 percent.
All of which should make for an interesting shareholders meeting in Blue Bell after all.