Story distorted investor's role in Grove Farm merger

YOUR readers deserve to know the full picture of Steve Case's involvement in the December 2000 merger of Grove Farm on the island of Kauai, referenced in the Bloomberg News Service story of August 1. The article painted a flawed picture and distorted the truth about Case's role in the transaction.

For several years prior to the merger, the economy of Kauai was terrible due to the effects of Hurricane Iniki in September 1992, compounded by the exodus of Japanese investors from Hawaii. Grove Farm was badly affected: Dividends were halted, projects were left half-completed and credit facilities were exhausted. The directors -- all of whom were also shareholders -- determined that the company should be sold in early 2000.

After the shareholders narrowly rejected an offer of $125 per share, the directors unanimously approved an offer of $140 per share. If that buyer had not pulled out of the deal at the last minute, Grove Farm would have been sold for that price -- a lower one than what Steve Case ultimately paid for the company. Thus, contrary to the picture given your readers, the decision to sell Grove Farm to a new owner was made before Steve Case was on the scene, and was one that Case had nothing to do with.

Once the potential buyer selected by the board and shareholders refused to close the deal, Grove Farm was then left to search for a new buyer. Then, and only then, did Steve Case emerge as a potential buyer. At the outset, the board expressly agreed that Steve Case's father, Dan, could act as his agent. Case made a bid for Grove Farm, and after some negotiations raised his offer to $152 per share -- about 10 percent more than the previous offer that had been accepted, and higher than any other credible bidder was willing to pay under the tight deadlines imposed by the Grove Farm board due to the company's deteriorating financial situation. Thus, it's no wonder that more than 99 percent of the shareholders voted to approve Grove Farm's merger with Steve Case's company.

Since late 2000 the Kauai economy has improved. Grove Farm has benefited from growing tourism and from tens of millions of dollars spent under Steve Case's leadership to renovate and complete real-estate projects that had floundered under former management. This should be cause for celebration. Instead, it has been the basis for an after-the-fact attack on Case and the Grove Farm directors. In 2002 a handful of former shareholders filed suit against the directors who approved the merger, seeking more money for their shares than they were given at the time of the sale.

The bottom line is this: In 2000, Grove Farm was in desperate financial straits, Steve Case took a big gamble on a deteriorating business and shareholders overwhelmingly backed the sale. Case took a further risk by investing millions more in improving Grove Farm and its facilities. Now that those risks have yielded results, critics have come out of the woodwork. Guy Combs, the former director quoted in your story as saying, "Grove Farm did not have to be sold," is the very same person who once said that the only alternative to selling the company was bankruptcy, and who voted to sell the company to a different buyer at a lower price than what Case paid.

Bloomberg's slanted presentation of this dispute -- based largely on documents and materials provided by the plaintiffs -- is unfair and misleading.

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