Sugar Daddy

Florida Gov. Charlie Crist's plan to buy U.S. Sugar for $1.75 billion has been described by Florida newspapers as "bold," "ambitious," and "grand."

Now it's time to throw "stupid" and "irresponsible" into the mix.

It's true that the deal, in its broad strokes, may look like a masterpiece. It will conceivably rid the Everglades of the lion's share of its pollution and set the stage for the ecosystem's rebirth. In the long run, it's something that needs to be done, and that makes it hard to argue with.

The devil in this deal, however, is in the details, and they stink like the blackest swamp muck in the stopped-up River of Grass. Not only does the plan present a possible financial nightmare for the state but it obviously overprices U.S. Sugar and reeks of undue influence from both the industry and some of the governor's closest allies in state government.

Start with the bottom line, the $1.75 billion price, which the state intends to borrow and pay off with property tax dollars over 30 years at an actual cost of $3.5 billion. The state, to make the plan work, must also negotiate a major land deal with the other big sugar concern in the state, Florida Crystals, which is run by the notoriously tough Fanjul family.

This is in the midst of what looks to be a long recession where homeowners are already overburdened and the state is so broke it cut $1 billion from public education.

"People can't afford to drive down the road to get something to eat," says Hendry County Commissioner Darrell Harris. "Teachers are getting laid off, state workers are getting laid off. And [Crist is] spending $1.75 billion on this?"

Understand that Harris, like most of the 40,000 people in his county, doesn't like this deal. Part of the reason for that is it will likely decimate Hendry's economy.

Still, if the deal was a good one for the state, the timing might be forgiven. Now consider what the state is buying. U.S. Sugar is saddled with debt, under pressure from lower-priced sugar imports, and dependent on massive federal price subsidies to make whatever relatively meager profits they are making right now.

Oh, and the company also created all that pollution that we're spending all those billions to clean up. For that it gets a huge buyout (or bailout, if you prefer).

Harris says he believes the state is about to pay way too high a price for the sugar company and its 187,000 acres. When asked what he thought would be a fair price, he said, "About a billion."

Gaylon Lawrence is pretty sure the state is overpaying too, and the wealthy banker and landowner ought to know. He recently thought he'd bagged Big Sugar himself, before it got away.

The 73-year-old Missourian, who splits his time in Vero Beach, wanted to buy U.S. Sugar Corp. and in 2005 found a willing seller in U.S. Sugar's CEO, Robert Dolson.

The price: About $1.1 billion, including a $575 million sale price plus the assumption of about $500 million dollars in debt, taken on by the company to update the sugar plant.

"That was [Dolson's] suggested price, not mine," Lawrence told me in his first interview regarding the deal last week. "We settled on $575 million plus the debt. We thought we had a deal... We were looking at this as a keeping situation, as a family situation. It would have taken us five years to make it a good solid investment."

It's no wonder Dolson thought the price, which amounted to just over $1 billion, was good for the company. It represented a 50 percent premium in the private stock price, from $200 a share to $293 a share. Most businessmen would call that a sweet deal.

Lawrence says both he and Dolson were confident the terms would be accepted by the board, which is controlled by the descendants of U.S. Sugar founder Charles Stewart Mott, who made his initial fortune as a General Motors partner and shareholder. The Flint, Michigan-based C.S. Mott Foundation, with more than $2.5 billion in assets, and related entities still own a majority of U.S. Sugar, while workers have a 38 percent stake.

The current chairman of the U.S. Sugar board is William White, husband of Mott's granddaughter. As much as the late Mott was respected in Clewiston, White is distrusted, viewed as a distant landlord who cares little about the company while collecting the government-subsidized dividends for the foundation.

White and the board rejected the offer from Lawrence, and Dolson was soon sent packing from his CEO job with a $10 million company parachute (though Lawrence says he doesn't believe the rejected offer had anything to do with the departure).

"The farther [the Mott family] gets away from the source, the less they know about it," says Lawrence. "They thought they were doing right."

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Journalist Bob Norman has been raking the muck of South Florida for the past 25 years. His work has led to criminal cases against corrupt politicians, the ouster of bad judges from the bench, and has garnered dozens of state, regional, and national awards.
Contact: Bob Norman