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Steve Case pays
$26 million for
Kauai’s Grove Farm

More than 98 percent
of the shareholders
approved the deal

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By Anthony Sommer
Kauai correspondent

PUHI, Kauai -- Shareholders of Grove Farm Co. today overwhelmingly accepted a $26 million offer from America Online chairman Steve Case to buy the financially troubled Kauai company that was founded in 1868 by George N. Wilcox.

Once one of Kauai's largest sugar plantations with 22,000 acres in cultivation, Grove Farm stopped growing cane in 1976 and since has concentrated on developing its property for other uses. The company has been operating in the red for several years.

Sources said 98.6 percent of the 160 stockholders approved the sale in a meeting held, somewhat ironically, at Kilohana, the 1930s mansion of Gaylord Wilcox, which is now a tourist attraction.

They said the $26 million is in escrow and the sale could be completed by the close of business today.

Case's father, Honolulu attorney Dan Case, was at the meeting representing his son. Stockholders who asked to not be identified said he promised to retain all current Grove Farm employees.

He reportedly also told the stockholders there would be a major investment in the company's Kukui Grove Shopping Center, Kauai's only major mall, which has fallen into disrepair.

The elder Case would not make any promises regarding the future of Mahaulepu, a pristine coastal area that is considered prime resort property. Environmentalists have fought for three decades to keep hotels out of the area.

The purchase had been strongly opposed by a small minority of the 160 Wilcox family members who believe other buyers were willing to pay far more than Case.

Yesterday, Michael Sheehan of Hanalei filed a lawsuit challenging the sale in Kauai Circuit Court alleging the board of directors failed to obtain the highest possible price for the property and breached its fiduciary duty to the stockholders.

Case, 42, is a fourth-generation Hawaii resident and a Punahou classmate of many of the Wilcox family members of his generation. His grandfather, A. Hibard Case, was a longtime manager of Grove Farm.

Many Kauai business and government leaders have indicated their support of a sale to Case because of his local ties.

Today's vote was the latest in a series of attempts to get stockholders to agree on a sale.

On Jan. 21, Scott A. Blum, founder of buy.com, offered $125 a share -- or $12 million -- but fell short of the 75 percent stockholder majority.

There are about 171,000 shares of Grove Farm stock.

Last summer, the Honolulu-based Honu Group, a shopping center developer, offered $140 a share but withdrew its offer before the stockholders voted.

Case's offer of $152 a share, although supposedly confidential, leaked out in early November.

Privately, however, family members said a mainland developer unofficially indicated it would pay $175 a share if Case's bid was rejected.

Along with the stock, the new owner will assume about $66 million in debt.

One stockholder calculated if Case bought Grove Farm for $152 a share he is actually obligated for about $600 a share when that debt is added in.

In addition to the mall, Grove Farm has agricultural lands, a golf course and on-going residential development projects. Grove Farm officials have said publicly that the company does not generate enough revenue to cover its costs and is not able to borrow any more money.

Last year, Case bought a controlling interest -- about 41 percent -- of Maui Land & Pineapple Co. for a reported $42 million.