Swope v. Siegel-Robert, Inc., 4:97CV02016ERW.

CourtUnited States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
Writing for the CourtWebber
Citation74 F.Supp.2d 876
PartiesThomas A. SWOPE, et al., Plaintiffs, v. SIEGEL-ROBERT, INC., Defendant.
Docket NumberNo. 4:97CV02016ERW.,4:97CV02016ERW.
Decision Date23 June 1999
74 F.Supp.2d 876
Thomas A. SWOPE, et al., Plaintiffs,
No. 4:97CV02016ERW.
United States District Court, E.D. Missouri, Eastern Division.
June 23, 1999.

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John R. Musgrave, Thompson Coburn, St. Louis, MO, Lawrence C. Friedman, Partner, Kevin A. Sullivan, Thomas J. Green, Thompson Coburn, St. Louis, MO, for Plaintiffs.

Jackson D. Glisson, III, Greensfelder And Hemker, St. Louis, MO, Joel A. Poole, S. Jay Dobbs, Polsinelli and White, St. Louis, MO, Gerald R. Ortbals, Stinson and Mag, St. Louis, MO, for Defendant Siegel-Robert, Inc.

Kathleen R. Sherby, Jennifer M. Arthur, Bryan Cave LLP, St. Louis, MO, for movants.


WEBBER, District Judge.

This matter is before the Court on Plaintiffs'1 complaint under R.S.Mo. § 351.455 seeking the Court's "fair value" determination of their shares in Siegel-Robert, Inc., a Nevada corporation.2 Hereinafter, the reference to Siegel-Robert, Inc. shall be the "Company." The Court makes Findings and Conclusions pursuant to Fed.R.Civ.P. 52.


This is, in its most basic sense, a proceeding to determine the "fair value" of the shares of minority interest shareholders who were "squeezed-out" in a corporate merger on the 31st day of July, 1997, when Siegel-Robert, Inc., a Missouri Corporation, became merged with Siegel-Robert, Inc., a Nevada Corporation. The minority interest shareholders3 were forced to sell their shares to the newly formed Nevada corporation at the price of $20.00 per share. While they could not refuse to surrender their shares, receive stock in the newly formed Nevada corporation, or reject the price of $20.00 per share offered by the Company for their shares, R.S.Mo. § 351.455 provides a procedure whereby they can, through a judicial proceeding, determine the fair value of the shares as of the day before the merger date of July 31, 1997, and force the Company to pay the fair value for those shares. Plaintiffs provided written notice to Siegel-Robert, Inc., a Missouri corporation, of their objection to the merger proposal before the shareholders voted on the proposal, and voted in opposition to the merger. They made the required written demand upon the newly formed Siegel-Robert, Inc., a Nevada corporation, for the fair value of their respective shares. When the parties were unable to agree on a sum to be paid for the shares beyond the $20.00 per share amount, this lawsuit followed.

The history of the Company reflects a true American success story. The original Company was formed in 1946 by Mr. Bruce Robert as a part time enterprise, operating in a make-shift room where objects were chrome-plated for a very limited market. Mr. Robert was a wise businessman who recruited capable associates who had a major impact on the Company's successful development. O.W. Schneider, Jr., deceased, worked for the Company for 40 years. He helped build the Company through his technical expertise. He had a working knowledge of factory building and

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acquisition and disposition of the equipment, and he was very adept at supervising people. Mr. Schneider was permitted to acquire an ownership interest in the business which he had helped build. His shares were acquired in the 1970's and 1980's.

The Company began to experience substantial growth in the 1980's when it began to diversify. The Company began an aggressive diversification program because the Siegel-Robert Automotive and Appliance Division is engaged in a very cyclical business where demand for its products varies with the fortunes of the economy and where profit margins are lower than for companies in the technology field. In this very competitive industry, customers for its products accept the lowest bids, and the Automotive and Appliance Division continuously is required to lower its prices and become more productive. In 1993, 74% of gross revenues were attributable to the automotive industry component of the Company. By contrast, in 1997, the subsidiaries accounted for 42% of the gross revenue. Management's plans to spread risks and enhance profitability of the Company have succeeded. In 1981 annual sales of sixty million dollars were comprised of fifty-five million dollars from automotive products. Business was cyclical, and at that time was adversely impacted by the grain embargo. Management saw the importance of considering diversification of the Company and began looking at acquisition candidates in manufacturing that sold to customers other than retail. They were looking at companies in a relatively close geographic area involved in unsophisticated technology, typically in a radius of 400 miles from St. Louis. The Company wanted to maintain close personal relationships with management of acquired companies on a long-term basis.

The Company is now primarily composed of the following six business units:

1. Siegel-Robert Automotive and Appliance Division4 — Founded in 1946, it is located in St. Louis, Missouri, and is involved in the auto part industry, producing grilles, consoles, exterior mirrors, shift indicators, decorative decals, and interior moldings to original automotive manufacturers. It produces "value added parts."

2. Advantek — Founded in 1978 and acquired in 1992, this company is involved in packaging material for semi-conductors. It is located in Minnesota and sells carrier tape, cover tape, and integrated circuit test handlers.

3. Continental Disc Corporation — Established in 1965 and acquired in July, 1988, this company produces custom rupture discs and over pressure release devices and vacuum relief devices used in industrial environments.

4. Correl, Inc. — Founded in 1969 and acquired in 1982, this company, located in Charleston, Arkansas, manufactures stacking chairs, multi-purpose folding tables, bookcases and computer furniture. It is classified in the furniture industry.

5. Dolch Computer Systems, Inc. — Founded in 1987 and acquired in February, 1996, located in Freemont, California, this company manufactures a specialized line of industrial portable computers. It also packages for resale touch-screen flat panel displays. It is classified in the portable industrial computer industry. Dolch Computer Systems is the Company's largest acquisition.

6. Sensidyne, Inc. — Founded in 1983 and acquired in 1990, this company is located in Clearwater, Florida and

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manufactures toxic gas detection systems. It is in the analytical instrumentation and measurement industry.

The first Company acquisition, occurring on May 17, 1982, was Correl, Inc., a small company manufacturing a very simple product line consisting of a folding leg table. This office furniture division has little leverage in pricing because its primary customers are chain stores. The company had $3 million in sales in 1982 and over $20 million in 1997. It now employs approximately 190 persons. The division has competent management. O.W. Schneider, Jr., was brought in to help with the manufacturing methods at Correl. There is little, if any, efficiency to be gained in the manufacturing process at Correl. Customers of Correl are Office Depo — 68% of revenue; Sam's Wholesale — 17-18% of revenue; and Sam's International — 2% of revenue. Costs have escalated at a time when the company has been unable to gain price increases for its products. Revenues have increased from 18.2 million dollars in 1993 to 23 million dollars in 1997. Growth will likely slow because of the loss of one significant customer.

Sensidyne manufactures gas detection and air sampling equipment including transmitters, sensors, and a pump used by industrial hygienists. Sensors are an important part of the gas detection business, and they are readily available in many markets. Recently, revenues have increased, but management believes it has hit a plateau because of market saturation. The company also distributes gas detection tubes that are made in Japan. Until recently, Sensidyne had exclusive distribution rights for the Japanese products. In 1997, the company distributed 40% of the Japanese products that accounted for 70-80% of its products. There is no long-term distribution agreement in place. The agreement made in August, 1996, was terminated. Sensidyne's toxic gas detection systems, produced and distributed by 94 employees, monitor areas for protection of workers and the public, mostly in the health and safety industry. These devices it produces may be reproduced by most competent electrical engineers. There are no patents protecting any of the products. Carl Mazzaca, president of this division, expects sales for that division to improve at the rate of 1 to 1½% over the next two years. He believes Sensidyne was purchased at peak performance and that its future sales are likely to decline.

Acro Molded Products, Inc., manufacturers cellular phones and other communication products including wire harnesses that connect electrical systems of mirrors which the automotive division manufacturers for cars. It also does business in the medical industry. Its sales have decreased about 10% since 1997. Motorola, its biggest customer, is decreasing its market share. Revenues increased from 14 million dollars in 1993 to 19.5 million dollars in 1997, with a spike of 22.1 million dollars in 1996. Pre-tax income in 1997 of 1.9 million dollars is highest for the period from 1993 - 1997.

Advantek was purchased at a time when its business was increasing. Its primary product is embossed carrier tape. It produces custom packaging products for original equipment manufacturers. Basically, the product is a mylar strip that it stamped to create a compartment for integrated circuits or for other products placed in the compartments. A cover tape is heat activated and placed on top of the carrier tape to hold the product in the compartment. Advantek distributes the product and does not manufacture it. The reels that control the...

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9 cases
  • Swope v. Siegel-Robert, CROSS-APPELLANTS
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • June 12, 2000
    ...of its minority shares did not reflect the "fair value" of the shares pursuant to Mo. Rev. Stat. 351.455. Swope v. Siegel-Robert, Inc., 74 F. Supp. 2d 876 Page 489 (E.D. Mo. June 23, 1999) (memorandum and order). For reversal, the Company argues the district court erred in (1) holding that ......
  • Ritchie v. Rupe
    • United States
    • Court of Appeals of Texas
    • April 27, 2011
    ...Deeds in the Close Corporation, 54 Duke L.J. 293, 313 (2004) [hereinafter Moll, Fair Value ]; see also Swope v. Siegel–Robert, Inc., 74 F.Supp.2d 876, 911 (E.D.Mo.1999) (defining “enterprise value” “as the amount ‘a willing buyer realistically would pay for the enterprise as a whole on the ......
  • Robert v. U.S., 03-1603.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • April 29, 2004
    ...of Missouri in which we approved a method for determining the "fair value" of Siegel-Robert stock. See Swope v. Siegel-Robert, Inc., 74 F.Supp.2d 876, 879-910 (E.D.Mo.1999), aff'd in part and rev'd in part by 243 F.3d 486 (8th Mr. Mannion claims that, on August 12, 2001, he conducted an ini......
  • RITCHIE v. RUPE, 05-08-00615-CV
    • United States
    • Court of Appeals of Texas
    • March 28, 2011
    ...Deeds in the Close Corporation, 54 DUKE L.J. 293, 313 (2004) [hereinafter Moll, Fair Value]; see also Swope v. Siegel-Robert, Inc., 74 F. Supp. 2d 876, 911 (E.D. Mo. 1999) (defining "enterprise value" "as the amount 'a willing buyer realistically would pay for the enterprise as a whole on t......
  • Request a trial to view additional results

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