Monday’s announcement that Beretta and Ruger had chosen to do business rather than engage in all-out corporate combat is a win for all parties, especially the Ruger shareholders. Having watched Wall Street and corporate America combat for what is rapidly approaching a half century, the facts of these sort of matters make it obvious that a negotiated peace is decidedly better than protracted combat.
In general, a collaborative agreement focuses on the common goal of all companies: making money. Either company is formidable in its own right. Beretta has more than twice the corporate history of the United States and “Holdings” - the conglomerate of today, already has nearly 50 companies worldwide in its portfolio. Ruger isn’t just an American icon, it’s an extremely successful company with popular, reliable products, no corporate debt, and cash reserves that are the envy of the industry.
With this week’s announced agreement, both sides appear to have realized it’s better to bring their common interests together than engage in the expensive business of hostile corporate combat. As is essential in all negotiated agreements, both sides appear to have made concessions. Ruger is dropping its poison pill defense designed to dilute a hostile takeover attempt. Beretta, in turn, agrees to cap its Ruger stock holdings at twenty-five percent, with the additional shares to be acquired in a tender offer for $44.80/share—in cash.
Beretta’s also withdrawing its nominees to the Ruger board of directors, pledging not to make another proxy tender for three years, and agreeing to vote its shares with the Ruger board of directors, unless a matter works directly against Beretta’s corporate interests. In return, Ruger will “temporarily” expand their board by two members—to be selected by Beretta.
Having spoken at length with high ranking officers on both sides, the idea of a protracted battle inside the firearms industry was mutually accepted as not being in any of our best interests. Ultimately, that mutual agreement helped lead them to seek areas where they could use their respective strengths to their mutual advantage, rather than seeking to highlight the others’ perceived shortcomings to win a corporate battle.
Beretta Holdings is one of the great success stories of global business. But its culture is familial, not corporate. Ruger may have begun as a Horatio Alger-type “only in America” success story, but today it is a publicly-held corporation. Those are drastically dissimilar cultures. Blending dissimilar corporate cultures isn’t work for the faint-hearted or the thin-skinned, even when both parties agree.
That’s why it would appear this three-year working agreement is best for everyone. When I was involved in the merger of Continental and Eastern Airlines (that makes me feel really old), I was talking with an Eastern Airlines captain and asked his feelings regarding the merger. “Merger,” he snarled, “this isn’t a merger; it’s a mid-air collision. We’re headed for a smoking hole.”
He was more correct than I could have imagined. He was basing his feelings regarding the outcome on the corporate cultures and how different they were. The business “leaders” didn’t know anything about those corporate cultures, they were looking at the revenue potential of overlaying Continental and Eastern route maps, cutting out “inefficiencies” and maximizing both lift and yield. There were numerous arguments between the two companies as to which was more valuable “lift” or “yield” - one said the capacity was most important; the other said smaller planes flying full had a higher yield. The two sides never agreed. Consequently, the pilot’s assessment turned out to be the most accurate of all.
No one wins cultural wars. Even corporations.
We’ll keep you posted.
—Jim Shepherd
