WSJ -- Krispy Kreme Investor Says Willing To Boost Ownership .............................
March 22, 2005 2:27 p.m.
Krispy Kreme Investor Says Willing To Boost Ownership
By MARY ELLEN LLOYD
Of DOW JONES NEWSWIRES
CHARLOTTE -- The Australian investment management firm that recently became the second-largest shareholder of Krispy Kreme Doughnuts Inc. (KKD) has offered to invest more in the troubled doughnut company, a top officer of the firm said.
"We quite like the brand; we quite like the positioning," David Buckland, chief executive of Hunter Hall Investment Management Ltd., said in a telephone interview late Monday. "If they do need to issue more equity, then we said we'd definitely be willing to put our hand up."
The Sydney firm, which manages roughly $1.1 billion in assets, said in filing with the U.S. Securities and Exchange Commission last week that it recently purchased 4.05 million shares, or 6.55% of outstanding shares.
Hunter Hall is hoping its stake in Krispy Kreme will work out favorably, the way another U.S. investment did several years ago. The firm became a large shareholder in Donna Karan International Inc. about five years ago as the New York fashion house's share price languished, said Buckland, who is also a director of parent company Hunter Hall International Ltd. (HHL.AU).
The firm benefited nicely in 2001 when LVMH Moet Hennessy Louis Vuitton (LVMHY) bought Donna Karan for $243 million.
"We've done very well historically out of buying what I call big-value situations - stocks that basically generally have a pretty good brand or positioning, but where the share price has been hit hard for one reason or another," Buckland said. Hunter Hall primarily owns stocks of companies based in the United Kingdom, Japan, Korea and Australia, and Krispy Kreme is the firm's only current investment in a U.S.-based company, he said.
The firm has no plans to take an active management role in Krispy Kreme - at least "not at this stage," Buckland said. Hunter Hall has been represented on the boards of several Australian companies, he said.
Firm founder and Chairman Peter J.M. Hall has had "brief discussions" with Krispy Kreme management, but the Winston-Salem, N.C., company has been tight-lipped with all investors, Buckland noted.
Among Hunter Hall's concerns: the fact that Krispy Kreme's accounting and corporate governance practices are under scrutiny. "We've sent a letter," outlining concerns, Buckland said, declining to elaborate. Hall was unavailable for comment.
Krispy Kreme has said it plans to restate 2004 financial statements and interim 2005 figures, largely due to accounting errors in its acquisition of certain franchises. The SEC and the U.S. attorney for the Southern District of New York are investigating the company.
Bank lenders have restricted Krispy Kreme's borrowing under a $150 million credit facility, which faces a possible default because the company hasn't filed financial statements for the quarter ended Oct. 31, 2004. Lenders in January, however, agreed to push back the date of possible default to Friday, so investors are awaiting word this week on the company's financial situation and prospects.
A Krispy Kreme spokeswoman on Monday declined to comment on Hunter Hall or Courage Capital, a Nashville, Tenn., investment firm that has also taken a large stake in Krispy Kreme in recent days.
Krispy Kreme operates more than 400 stores in the U.S., Canada, Mexico, Australia, South Korea and the United Kingdom.
Corporate Web site: krispykreme.com
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-371-4033; maryellen.lloyd@dowjones.com
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