Corporate Divorces Underway (Gwen Moritz's Commentary)

by Arkansas Business Editors  on Monday, Jun. 5, 2006 12:00 am  

Arkansas Business and Arkansas Times used to be sister publications. In 1995, the family experienced what is known as a "corporate divorce." Mom, Olivia Myers Farrell, got custody of Arkansas Business and some other publication titles; Dad, Alan Leveritt, kept Arkansas Times and some other titles. The settlement was complicated; there is still some common ownership and shared financial interest. Even more than a decade later, a lingering issue will pop up every now and again to generate a few more legal fees.

A couple of big corporate divorces are taking place in Little Rock right now that dwarf the little old split of Arkansas Writers Project: Alltel and the Stephens Group.

Alltel Corp. is marrying off its wireline division to a small Texas phone company called Valor, and the resulting company is to be called Windstream Communications Inc. It's a corporate divorce of convenience, strictly a matter of maximizing future profit potential and stock prices.

Windstream employees are setting up housekeeping in the Alltel ancestral home in west Little Rock, and they are getting all kinds of counseling on "separation" and "convergence." But if divided loyalties among former colleagues aren't already causing a few disputes, they will soon. It's a natural part of the process.

The Stephens corporate divorce is being advertised as amicable and inevitable, and it may well be. Witt and Jack Stephens didn't ask to be brothers, but they did choose to hitch their fortunes together; their children did not. There is no reason Witt Stephens Jr. and his surviving sister, Elizabeth Stephens Campbell, should remain hitched to Jack's son Warren into perpetuity — although I can think of many worse bets. (Warren's brother, Jackson T. "Steve" Stephens Jr., unhitched himself from the family business years ago.)

The logistics and legalities of Alltel and Valor's "reverse Morris trust" are almost unfathomable, but at least there is a clear distinction between Alltel's wireless business and Wind-stream's wireline operations. Jobs that involved both sides will simply have to be duplicated, but divorce is expensive that way. No one ever said two corporations could live as cheaply as one.

The Stephens corporate divorce, on the other hand, will require more lawyers than Carter's has little pills. Brokering securities is a regulated industry, so Warren will have to get permission from the federal government to acquire the half of the Stephens Inc. investment house that he doesn't already own. And there will be shared assets, the most sizeable of which seems to be Stephens Media Group — formerly known as Don-rey Media Group.

I wouldn't call it a messy divorce, but it sure won't be one of those $300 specials.

No wonder Witt Jr. and Elizabeth have hired Ron Clark away from his job as CEO of Rose Law Firm to work for their company (which will confound us all by being called the Stephens Group).

If anyone understands the corporate divorce, it would be Ron Clark. He guided Rose through the turbulent years when it was losing partners to the Clinton administration (and, in the case of Webster Hubbell, to prison for ripping off other partners). Then he saw it through the major defection in 1998 of nine attorneys who saw greener pastures with the national firm of Kutak Rock — which, as the list that begins on Page 22 reflects, is now almost as big in Arkansas as Rose.


The Stephens holding company will, when the split is complete, be known as SH Corp. Because it will include Stephens Media, which had estimated revenue of $264 million in 2004, SH Corp. will undoubtedly be among Arkansas' 75 largest private companies when we attempt that list again next year.

And Stephens Inc., whose 2004 revenue was estimated by Thom-son Gale Competitive Intelli-gence at almost $1.15 billion, will remain near the top.

But what of the new incarnation of the Stephens Group? Here's hoping Witt Jr. and Elizabeth are more forthcoming than Warren ever has been.



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