preview

Kohler Co. Case Summary Essay examples

Decent Essays

Kohler Co. began as a manufacturer of plumbing fixtures in Sheboygan, Wisconsin in 1883. John Michael Kohler, an Austrian immigrant, who for ten years prior to that, produced farm implements and yard ornaments, started the company. John Michael’s son, Walter J. Kohler Sr. became president and CEO in 1905 after his father’s death. Walter headed the company for 35 years. Under his control, Kohler became one of the leading plumbing fixtures manufacturers in the country after introducing numerous innovations. One of the major progressions included manufacturing electric generators starting in the 1920s, which proved very successful. After Walter’s death in 1940, his half-brother, Herbert Kohler, Sr. took over the company. When he died in 1968, …show more content…

However, there had been some sales of shares by family members to outsiders. In 1978, Kohler was up to over 400 shareholders, and when they got to 500, they were subject to stricter regulatory requirements by the Securities Exchange Commission, and would have to make detailed financial disclosures. So in order to make sure this wouldn’t occur, Kohler declared a 1-for-20 reverse stock split.
In 1998, Kohler experienced issues with the publically traded shares since they did not have any control over them. The share prices drastically went up, and the high share prices brought on speculation about whether the company intended to go public, and drew attention to the company’s existing ownership structure. These publically traded shares consisted of 4% of Kohler, Co. stock.
Because of this, in 1998, Herbert Kohler proposed a recapitalization of Kohler, Co. with the intention to buy out all of the outside shareholders and restricting the future sale of stock to non-family members or other Kohler insiders. He suggested this because Kohler wanted to keep their private status and avoid high share prices because they might encourage some family members to see their shares, releasing them to outsiders. After consulting an independent valuation firm, Kohler Co. set their final buyout price at $55,400 per share.
After the recapitalization, over 100 owners of 811 shares challenged the company’s valuation of their shares and rightfully filed suit against the company.

Get Access