Wrigleys Dual-Class Equity Strategy

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Wrigley’s Case

Question 1) a) There were 199,230,000 shares of Common stock. The board declared a 1 for 4 Class B stock dividend. So there were 4,980,750 shares of class B stock distributed to common shareholders. And there were 33,211,000 shares of class B shares outstanding of which those shareholders received a 1 for 4 dividend also; which would be 8,302,750 shares of class B distributed. Total shares of class B shares given as a dividend are 13,283,500. Value is 13,283,500 x .0669 = $888,666.15

Contributed Capital + Earned Capital
+888,666.15 -888,666.15

b) The outstanding shares of 2,222,000 would now be 3,110,666. Contributed capital would increase and retained earnings would decrease.

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I think the dual-structure is working well for Wrigley. They are making money. And if you don’t like how they are managed then don’t invest in them.

Question 5)
This is a fairly clever way of reinstating family control for the long haul," says Kenneth Henderson, a partner in finance and securities law with the law firm Bryan Cave LLP in New York. Wrigley spokesman Christopher Perille acknowledged the nature of the Class B stock would increase the voting power of those who hold onto the stock over time. The company created its dual-class stock structure in 1986. But the new B shares don 't sit well with every shareholder. “It had nothing to do with shareholder value and everything to do with voting control," said James Burns, of East Syracuse, N.Y., money manager J.W. Burns & Co. Mr. Burns, who has held Wrigley shares for 18 years, recently cut his stake to fewer than 50,000 shares. At one time, he held as many as 300,000 shares.
Wrigley 's share structure also acts as a barrier against a hostile takeover of the company by putting power in the hands of long-term shareholders who are unlikely to heed such advances. Such a defense isn 't an option for most companies. In the mid-1990s, the NYSE and other stock exchanges imposed rules against dual-class structures that create differences in voting power. But those that already had them -- such as Wrigley, Viacom Inc. and Hollinger International Inc. --

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