Brian Garfield: Villiers Touch

Ordinarily he was indifferent to image-his own or anyone else’s-but in finance, where proxy votes depended on stockholders’ confidence, a man in motion needed an unsullied background. Poverty itself was not suspect; but there were different kinds of poverty. Poor in the Horatio Alger sense was acceptable. Poor in the sewer sense was not. Mason Villiers’ poverty was dead, buried in the gutters of Chicago’s South Side.

Sidney Isher arrived. The lawyer was a small man with a nose like the snout of a teapot. His skin had the mottled look of fresh paste that often went with red hair.

“Hello, Mace. How are you?”

Villiers shut the door behind him. Isher cleared his throat; he had a bad case of catarrh, and a constant eye tic that made him look as if he was winking. The combination of handicaps was enough to make his success as a lawyer baffling. His jeweled cufflinks and tiepin bore his monogram-it seemed particularly fitting that Sidney Isher’s initials worked out as a dollar sign.

Villiers said, “What about Melbard?”

“How quickly you always come to my point. Do you mind if I sit down?” Isher opened an attache case and took out a sheaf of documents. “You can read it for yourself.”

Villiers went back to his breakfast. “I haven’t got time to read all that crap. Give me the high spots.”

Isher sat, withdrew a folder, and used his thumb to flip through the pages the way a bank teller would count money. He extracted one and began to quote bits and pieces:

“Melbard Patent Chemical Processing Corporation. A mouthful of names for a small company. Got a comfortable record, nothing spectacular-founded in 1927 by James W. Melbard, who still runs it, majority stockholder and chairman of the board. Started out by producing ethyl alcohol under a patented process. During the thirties it expanded to produce various pharmaceuticals and chemicals. In World War II it was one of the early suppliers of nitroparaffin insecticides and fungicides-the stuff they used in the South Pacific. After the war Melbard went into cosmetics as well-Melody Cosmetics and Cosmeticare, a pair of minor brand names. You still see them in drugstores here and there, but they’ve got no advertising. In the fifties some of their early patents expired, but the company got a boost from the Korean War and got more firmly established in biochemicals. Am I going too fast?”

“You’re going too slow.”

“Unh. All right. Early in the 1960’s Melbard started sinking a lot of money into research-the chief research biochemist is an egghead dedicated to ‘pure science,’ and I guess the Nobel Prize is just around the corner, but he hasn’t produced enough commercially profitable discoveries, and they’ve been losing money on him for ten years.”

“Why keep him on?”

“Because the old man, James Melbard, is an old buddy of the biochemist’s. You want a rundown on him?”

“Not now. Go on.”

“Okay. When the biochemist’s lab expenses started wagging the dog, James Melbard went public, to finance the research department. That was in sixty-two. Most of the stock stayed in family hands-about thirty percent of the total capitalization was issued as a public offering. Melbard’s a tight-fisted old son of a bitch, and he only issued enough stock to meet immediate needs. But the company’s got a good record.”

“Now, I’ve got a copy of the Dun and Bradstreet report here, from their auditors, and my staff did a little nosing around out there. The company’s in fair shape. It’s like a lot of family-owned companies-it’s suffered some mismanagement, mostly because old Melbard’s got this fixation on research. They’ve only got a hundred thousand shares of stock outstanding, besides the seventy percent that’s still in family hands and the twenty-three percent that NCI owns. What there is of it, the available stock’s worth quite a bit less on the market today than the company’s book value. From that point of view, it’s a good buy-if you can get your hands on some shares.”

Villiers said nothing in reply, whereupon Isher gave him a sharp look and added, “But I get the feeling you’re not interested in spending time and money to buy a few thousand shares.”

“Should I be?”

“As an investment? I’d vote no. Melbard’s been conservative in his dividend policies-twenty-five cents a year, mostly. The market price of the stock hasn’t moved three points either way in the past couple of years.”

“What about his board of directors?”

“Rubber stamp. Except for the two boys from Northeast Consolidated Industries. NCI’s pretty well committed in Melbard, you know-Melbard makes the basic chemical ingredients in a lot of the stuff NCI manufactures. Lanolin-cholesterol for cosmetic products. Chemicals for law-enforcement equipment like riot-control foams and gas-fog generators and that banana-peel stuff they coat streets with. Tear gas, gas-mask chargers, breathalyzer reagents-”

“You don’t need to read me the whole catalog.”

Isher made a growling sound; he blinked and said, “Okay, then what is it you want to know?”

“You said NCI owns twenty-three percent of Melbard and puts two of its own directors on Melbard’s board. The fact is, NCI owns sixteen percent of Melbard. Elliot Judd owns the other seven.”

“But Elliot Judd is NCI. Board chairman, biggest stockholder, what-have-you. What’s the difference?”

“The difference is, Sidney, I don’t pay you for sloppy work. I want facts, not approximations.”

Isher bridled. “Look, how can I give you what you want unless you tell me what you want? How am I supposed to know what to look for if I don’t know exactly what your angle is?”

“Do I always have to have an angle?”

“I wish I knew more about why you’re interested in Melbard. I could answer your questions with a good deal more precision. For instance, if you’re out to raid them the way you did Ewing, then it’s a very good setup. You offer the Melbard family a higher price for the assets than the existing market price of the stock. You can afford to do that, because you can still clear a healthy profit simply by breaking up the assets-mostly the inventory. Then pay off the family from the accumulated reserves and end up owning the physical assets for peanuts. It shouldn’t be too hard to get at it-old James Melbard’s sick, the rest of the family are golfers and clubwomen. All you have to do is go to them and convince them the company’s in danger of running down like an old clock.”

“Is it?”

“It could be, if they don’t get on the stick.”

“Go on,” Villiers said.

“Convince Melbard he needs help to modernize-then offer to buy him and his family out, with enough capital to save the company. You don’t buy all his stock, but naturally your price for bailing them out is controlling interest: you buy fifty-one percent of the stock. The family keeps the remaining nineteen percent. It should look attractive to them-after all, old James Melbard’s getting too long in the tooth to hang on much longer. If you buy in, they can’t lose, no matter what happens. They get a premium price for their stock. And they might even make more money on the shares they keep. Then, of course, there’s that item in the assets column called goodwill-some nice outside money could boost that for them.”

Villiers opened a flat silver case and took out a cigarette. “You got a match, Sidney?”

Isher snapped, “No. I don’t smoke.”

“Maybe you ought to. Might clear up that cough.” Villiers smiled a little.

“What else do you need to know?” Isher asked.

“For openers, we can’t move into this without knowing which way NCI’s going to jump when they find out Melbard’s got a buyer sniffing around.”