Company Sues HMC, Partner Over Takeover

A Kansas City, Mo. company filed suit Wednesday against the University's high-risk capital investment division, claiming the Harvard Private Capital Group and its partner are using confidential information in a hostile takeover bid.

J.C. Nichols Co., a real estate development company, requested an injunction in federal court to halt the takeover attempt. The Harvard Private Capital Group, an arm of the Harvard Management Company (HMC), invests money from the University's endowment fund.

The Kansas City company alleges that the Harvard group's partner, New York investment firm Allen & Co., is using information obtained from when it advised Nichols on financial matters.

"There is a predator at the doorstep of the J.C. Nichols Company," the company's chair and chief executive officer, Lynn L. McCarthy, said in a statement. "[W]e are not about to turn the future of J.C. Nichols over to just anyone who comes along."

Vice President for Government, Community and Public Affairs James H. Rowe '73 and University spokesperson Joe Wrinn declined comment, as did HMC officials. Allen & Co. representatives could not be reached for comment.

Allen & Co. and Harvard Private Capital Group have offered $50 million in cash and stock to buy control of Nichols, the Kansas City Star reported last week.

Nichols has refused to negotiate, according to a company statement, because the buyout proposal lacks a "long-term vision for the future."

McCarthy sent a letter to President Neil L. Rudenstine last week asking the president to pull the University out of the takeover attempt.

"Neither I nor the others on the Board of J.C. Nichols believe it is appropriate for tax-exempt university endowment funds to be used to finance hostile takeovers," McCarthy wrote in the letter, which was also mailed to The Crimson.

"I...urge you to investigate this situation and take all steps necessary to withdraw Harvard from its involvement in this matter," the letter continues.

Nichols has not received a response from the University, according to Kelly Sherman, vice president for public affairs at Nichols.

The letter was also sent to Robert G. Stone Jr. '45, University Corporation member; Allen J. Proctor '73, vice president for finance; Jay O. Light, Baker professor of business administration; and Michael Thonis, Michael Eisenson and Verne Sedlacek of HMC.

Allen & Co. served as a paid investment advisor for McCarthy and Nichols beginning in 1990, according to a statement released by Nichols.

The suit alleges that Allen shared confidential information obtained during that time with Harvard "and the two are using the information to launch their hostile takeover bid for the Nichols Company," the statement says.

Wednesday's suit comes in response to a suit filed December 28 by Allen & Co. against Nichols, the Star reported. That suit asks that Nichols release the names of its stockholders.

The Allen & Co. suit also demands that the court force McCarthy to repay $124 million Nichols loaned him. McCarthy used that money to buy 65 percent of Nichols' stock, the Star reported.

McCarthy has received $4 million in dividends but has not made any payments on the loan, the Star reported.

"It appears to be their intent to tear down the J.C. Nichols Company, and me personally, in an attempt to gain operating control of the Company," McCarthy said in the statement. "It is a sad commentary that a former business partner would stoop this low to wrest control of the Nichols Company.

"Neither I nor the others on the Board of J.C. Nichols believe it is appropriate for tax-exempt university endowment funds to be used to finance hostile takeovers," McCarthy wrote in the letter, which was also mailed to The Crimson.

"I...urge you to investigate this situation and take all steps necessary to withdraw Harvard from its involvement in this matter," the letter continues.

Nichols has not received a response from the University, according to Kelly Sherman, vice president for public affairs at Nichols.

The letter was also sent to Robert G. Stone Jr. '45, University Corporation member; Allen J. Proctor '73, vice president for finance; Jay O. Light, Baker professor of business administration; and Michael Thonis, Michael Eisenson and Verne Sedlacek of HMC.

Allen & Co. served as a paid investment advisor for McCarthy and Nichols beginning in 1990, according to a statement released by Nichols.

The suit alleges that Allen shared confidential information obtained during that time with Harvard "and the two are using the information to launch their hostile takeover bid for the Nichols Company," the statement says.

Wednesday's suit comes in response to a suit filed December 28 by Allen & Co. against Nichols, the Star reported. That suit asks that Nichols release the names of its stockholders.

The Allen & Co. suit also demands that the court force McCarthy to repay $124 million Nichols loaned him. McCarthy used that money to buy 65 percent of Nichols' stock, the Star reported.

McCarthy has received $4 million in dividends but has not made any payments on the loan, the Star reported.

"It appears to be their intent to tear down the J.C. Nichols Company, and me personally, in an attempt to gain operating control of the Company," McCarthy said in the statement. "It is a sad commentary that a former business partner would stoop this low to wrest control of the Nichols Company.