Opinion ID: 1799426
Heading Depth: 2
Heading Rank: 2

Heading: Gulf Group Purchasers of Control.

Text: At the head of the Gulf group is the Gulf American Land Corporation, not to be confused with its wholly-owned subsidiary, the G.A.L.C. Company. The Gulf American Land Corporation was organized in 1957 as a Florida land development company by two brothers, Leonard and Julius Rosen. It is described as one of the two largest Florida land development companies and its principal projects are Cape Coral near Fort Meyers and Golden Gate Estates near Naples, Florida. Gulf is listed on the American Stock Exchange and is, of course, a publicly held corporation. Gulf has shown a substantial profit each year since its organization and according to its audit report of August 31, 1963, had gross assets of approximately $167,000,000 with a net value of approximately $31,400,000. It is conceded to be typical of such land development companies as Gulf that as they convert raw land into marketable building sites, the overall outlay of cash is substantially greater than the incoming cash from sales. This results in what is described as a negative cash flow which prevails for several years until a sufficient amount of building lots have been sold to the point where the aggregate of receipts equals or exceeds the aggregate of current development costs. Until this condition is reached, it is necessary for such companies to finance their land development operations by borrowing substantial amounts of money. There is nothing to show that Gulf had not been successful in obtaining, at higher interest rates, at least, substantial loans for its operations. It was this continuing need for cash which plaintiff says spurred Gulf to seek and obtain controlling interest in Fenestra, a company with a high proportion of liquid assets which could be, in some manner not fully explained, converted to the use of Gulf. Included also in the Gulf group is the G.A.L.C. Company, a wholly-owned subsidiary of Gulf, which was incorporated solely as a security device in connection with the financing of the purchase by Gulf of the controlling interest in Fenestra. The stock was bought in the name of the G.A.L.C. Company whose stock and voting rights in turn were pledged to the lender, defendant Pritzker. Also identified as part of the Gulf group were two of Gulf's nominees to the board of directors of Fenestra. One was Sidney Friedman, a New York lawyer and director of various banks and other commercial enterprises, who had previously assisted Gulf in connection with certain financial transactions. The second such board nominee was James A. Farley, Jr., a New York bank president, who like Friedman was nominated by Gulf and elected to the Fenestra board but removed by the judgment of the trial court.