Teledyne Chairman Henry Singleton has often been called a genius on Wall Street for his deft handling of Teledyne's financial affairs, but he receives few accolades from Alfred J. Rubellke.
Rubellke, 67, of St. Paul, Minn., is a small player in stocks who says his largest single investment has flopped because of what he calls Singleton's "tight-fisted" financial policies at Teledyne.
Rubellke and a loose network of small investors, mostly retired, have waged a long and largely unrewarding fight against Los Angeles-based Teledyne over their rights as minority shareholders of a Teledyne subsidiary.
The subsidiary is Unicoa Corp., a publicly traded, insurance holding company in which Teledyne owns 98.4% of outstanding shares and exercises management control.
No Cash Dividend
The balance of Unicoa stock--just 66,043 shares--is held by 1,449 public shareholders, according to the companies' financial reports.
Minority shareholders complain that their Unicoa investment has paid no cash dividend for 16 years and has left them at a major handicap in liquidating their investment. They appear to exercise little, if any, influence over Unicoa management. Unicoa's directors are Singleton, Teledyne President George Roberts and Teledyne Vice President Jerrold Jerome.
Although Unicoa is a largely unknown entity, it accounted for 29% of Teledyne's 1984 profits. Unicoa operates the Chicago-based United Insurance Co. of America, a major life underwriter and a highly profitable firm.
On the basis of its earnings, Unicoa should be fetching a significantly higher price for its stock than is quoted by market-makers, according to shareholders, financial analysts and insurance industry experts. But with such a small public stock float, trading in Unicoa shares is close to nil, limiting the liquidity of the shares and thus depressing their value.
"If you have a stock for which there is no market and which pays no dividends, you have what is known as an illiquid dog of an investment," says Harvey Pitt, a Washington attorney and former general counsel of Securities and Exchange Commission.
The ownership arrangement between Teledyne and Unicoa is extremely unusual, if not unprecedented, according to Pitt and other securities analysts and lawyers. Indeed, the situation provides a graphic illustration of the potential hazards of holding stock as a minority shareholder.
"The rights of a minority shareholder in this situation are very badly protected," says Frank Wheat, a securities lawyer at Gibson, Dunn & Crutcher, a large Los Angeles law firm. "It isn't a situation where you have a clear opportunity to force dividends to be paid. I haven't ever run across a situation like this."
Pitt also says the Unicoa situation is "bizarre," because the expense and effort of meeting federal securities laws and reporting requirements generally push corporations to buy out minority shareholders and put an end to the public status of subsidiaries.
"Why are they keeping the company public? What possible rationale could they have for perpetuating this situation? It is unfathomable," Pitt said. "It is a sad story. I have seen similar stories, but not as bad as this."
Can't Find Reason
Indeed, analysts who have followed Teledyne for years are hard pressed to find any reason or advantage that Teledyne gains for bearing the additional expense and effort of maintaining Unicoa as a public company.
"It seems like such a nuisance that it would be worth it to buy back those shares," says Robert Hanisee, an analyst at Seidler Amdec Securities of Los Angeles. "Dr. Singleton operates in ways that are strange to us, but he is a very rational thinker. I would presume there is a rational reason for this."
Whatever that may be, Singleton isn't saying publicly. He and other Teledyne and Unicoa officials declined to be interviewed. Singleton has granted few interviews in recent years and has said little to Unicoa shareholders about their concerns.
For instance, when Rubellke stood up at the Teledyne annual meeting in Beverly Hills last April, the fourth consecutive such meeting he has attended to lobby for a dividend or a buy-out, he was politely told by Singleton that he was out of order.
Singleton suggested that it would be more appropriate for Rubellke to take up his complaint at the Unicoa shareholders meeting, not the Teledyne one. However, Unicoa was holding its meeting that very same day in Carson City, Nev. Apart from the conflict in timing, some shareholders think the location also discourages attendance.
Difficult to Get There
"You can't even fly to Carson City," says Ronald Brugh of Atlantic City, Fla., who was one of the few shareholders to attend. "We had to fly to San Francisco and then take a flight to Reno. We rented a car in Reno and drove to Carson City."