Davey Tree Flipbooks

51 50 Growth Rings And between December 1977 and April 1978 several other outside companies expressed an interest in buying the company. Two of these companies made follow-up visitations and did extensive research. One was a Fortune 500 non-industry related chemical company and the other a smaller, industry-related company. In early February 1978, the Davey family representatives retained a third outside firm to determine the fair market value of the company. Its report, published in April 1978, stated the "going concern" value of the company was approximately $6 million, but there was an additional $2 million associated with the company's excess real estate, about 40 acres, at the Pine Knoll Nursery in Suffern, New York. Factoring in the land value, the firm concluded that the total value of the company was $8 million, or $23.50 per share. e employee committee agreed with the going concern value and, in principle, with the excess real estate provision, but they disagreed as to the value set. On May 19, 1978, the outside group that had presented its first offer in January presented its second offer. is offer contained two alternatives: a total cash price of approximately $7.6 million or a total installment price of $8.5 million payable 29 percent at the time of closing and the balance payable in four equal annual install- ments, with interest. Both alternatives were conditioned upon the purchase of at least 80 percent of the outstanding shares. ree days later, the employees presented their second offer. It provided for the creation of a separate corporation to which the Davey Company would transfer the excess real estate and from which the Davey Company would receive all of the shares of the newly created corporation. e company would then offer to redeem up to 225,000 shares of outstanding Davey company stock at an approximate value of $21.50 per share. e employee group would purchase a minimum of 60,000 of the redeemed shares payable 36 percent in cash at the closing and the balance over eight years, with interest. e proceeds realized from the ultimate sale of the real estate would accrue to the shareholders of the new corporation and not to the Davey Company. As talks continued, some employees grew concerned about their future. During this period one important leader, Gene Haupt, seriously considered leaving the company. He had turned around the struggling Davey Tree Surgery a decade prior and had proven his ability to run a successful division. Haupt investigated the possibility of starting his own firm and bidding on utility work in the West. Fortunately, as talks continued and the employees' position grew stronger, Haupt became convinced he should remain with the Davey Company as a key manager on the West Coast. As president, Joy was beset by a number of other unique challenges during this period. Besides being responsible for running the company, as president, he also had to field calls from executives of companies inquiring about buying Davey Tree, even though he was deeply involved in the employee acquisition planning and negotia- tions. One of his more pressing concerns, as part of the employee committee, was helping to secure financing for the employee acquisition. "I found myself calling on banks rather than running the company," he wrote in his 2012 memoir, Climbing the Ladder. e employees had to line up additional financing because, even with the support of company managers, they did not have the combined personal wealth to buy the company outright. From a banking perspective Davey proved a reliable customer. e company had steady revenue streams, thanks in part to large utility contracts, and borrowed regularly to maintain and update its equipment fleet. But financing a loan for the employees to buy the company proved another matter, and a handful of banks turned down the employees' request for a loan. One bank president described their desire for an acquisition loan a "risky venture capital bet." Davey had done the bulk of its banking business with Society National Bank, today known as Key Bank, in downtown Cleveland. Society also happened to be a client of ompson, Hine & Flory. us, officials at Society finally agreed to provide Davey with a $7 million loan, but the employees still lacked enough cash to draft a deal the family would accept. As a result, Society agreed to the concept of involving a large bank from New York that could provide the additional financing to come up with a sum that would be agreeable to the family. Luckily, U.S. Trust Company of New York turned out to be interested in partnering with Society Bank to provide the employees with additional financing in their bid to buy Davey Tree. Two more developments occurred at about the same time. e incorporation of an Employee Stock Ownership Plan (ESOP) became part of the employee committee's discussions. e employees also came to an agreement with Brub Davey that would prove crucial to the acquisition. e arrangement stipulated that Brub Davey and his immediate family would keep their nearly 63,000 shares in the company for the near future so that the employees would not have to buy his stock immediately, thus making the purchase more affordable. e deal dictated that the company would buy Brub's shares at a later date. Brub later admitted that he was taking a gamble, but he viewed it as one of the most constructive acts he did for the company. "I didn't want to see a competitor taking over Davey Tree," he said in a 1995 interview. "I said, 'Let's keep it in the family.' e family, to me, was employees too. at's the larger Davey family, not just blood kin." e promise of financing from Society Bank and U.S. Trust, the ESOP and the agreement with Brub Davey became the foundation of the employees' third purchase offer, which the committee presented to the family on a warm, clear-skied Tuesday, July 25, 1978. e offer provided for the company to redeem up to 225,000 shares of outstanding stock. Brub Davey's family shares were subject to a buy/sell agreement and were therefore excluded from the offer. e proposal further provided that up to 150,000 of the redeemed shares would be sold to the newly created Davey ESOP, and the employee group would purchase a minimum of 60,000 of the redeemed shares. Both sales would be at $20 per share, with the employees being granted the option to pay for their shares over eight years, plus interest. e key to the success of the deal lay in Canada, according to "Do It Right or Not Chapter 3 Davey Tree transplanted the National Christmas Tree near the White House in Washington, D.C., in October 1978. e 30-foot living Colorado Blue Spruce came from York, Pennsylvania, to President's Park South. America has had a national tree since 1923, but only for the previous five years had it been living. e moving and transplanting called for the use of a semi-truck and trailer, and a 45-ton crane. e tree and root ball weighed an estimated 16 tons. District managers Clayton Cole, John Dingus and Dave Hintz, along with Greg Carpenter and Stan Hatzfeld, worked on the job. It was the first live transplanted tree to withstand the move beyond a few years. It stood as the National Christmas Tree until 2011 when it was severely damaged in a windstorm. In 2012, Davey helped find and transplant its replacement. Jack Joy performed double duty by serving on the employee committee pursuing the employee acquisition of the Davey Company while serving as president.

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