Chock Full O'Nuts, home of "heavenly coffee" and the nutted-cheese sandwich, has been an institution on the streets of New York since the days of Ebbets Field and the Roxy Theater. It was famous as the company where Jackie Robinson went to work after he retired from baseball.
But the company fell on hard times in the 1970s, closing more than half its streetside restaurants and taking a $25 million bath on its disastrous purchase of Rheingold Breweries. Chock Full, which is still run by its ailing, 80-year-old founder, William Black, and still features his wife in its coffee commercials, gained a reputation for stodgy management, obsolete marketing, and indecisive use of its valuable Manhattan real estate.
Now Jerry Finkelstein, who is something of a New York institution himself, is trying to take control of the company away from Black, its chairman, and from the current president, Leon Pordy, a cardiologist who got the job because he is Black's personal physician.
Finkelstein and a slate of investors have acquired about 17 percent of Chock Full's stock, and they are challenging the incumbent management in a bitter proxy fight. Finkelstein is seeking enough proxies to enable him to install his own board of directors at a shareholders meeting Wednesday.
Finkelstein is chairman of the board of Struthers Wells Corp., an oilfield equipment company, and of ABC Industries, publisher of the National Law Journal. By his own account, given in messages to stockholders, he has been involved in New York affairs since he worked for "the racket-busting prosecutor Tom Dewey" 40 years ago. His son, Andrew Stein, is Manhattan Borough president.
He has proposed an eight-point plan that he says will increase Chock Full's profits and enhance the value of the stock. The plan includes expansion of the restaurant business through national franchising, development of Chock Full's real estate, updating of the marketing plan, and putting out new products under the Chock Full name.
Chock Full's management has countered with strong attacks on Finkelstein personally, on the members of his proposed slate of directors, and on the performance of Struthers Wells and ABC Industries.
In open letters to shareholders--drafted by the public relations firm of Hill & Knowlton--Chock Full has accused Finkelstein of drawing $579,427 in compensation for himself from his companies while Struthers Wells is losing money and ABC is struggling to break even. Chock Full, responding to Finkelstein's charges that the directors rewarded themselves with 165,000 shares of stock at five cents a share, says the amount of Finkelstein's compensation was more than it paid last year to its five highest-salaried employes combined, "stock compensation included."
Howard Leitner, Chock Full's chief financial officer, said Black objected to Finkelstein's effort to seize control through a proxy fight instead of a tender offer, which would have allowed the shareholders to sell if they thought Finkelstein's price was right. But Finkelstein says he doesn't want to own the company, he just wants to replace the management, contending that Black, old and sick, has let it drift instead of looking for new ways to expand the business.
For the year ended July 31, Chock Full reported net income of $5.37 million on sales of $115.8 million -- the second year in a row in which both figures declined. But the company increased its dividend per share from 20 cents in 1980 to 40 cents this year, because it has paid off the debt from the Rheingold disaster and rebuilt its cash and asset positions, Leitner said.
He said it was true, as Finkelstein charged, that Black no longer goes to the office, that Pordy is Black's doctor, and that Black gets information about company activities through his wife, Page, a member of the board of directors. But he said that isn't the issue. The issue is that Chock Full has recovered from its troubles, is making new gains with its decaffeinated coffee, and is doing better than the companies run by Finkelstein and his associates.
Chock Full likes to quote the words of a judge who rejected Finkelstein's attempt to block the company from acquiring a coffee-roasting plant in Brooklyn that it formerly leased. Finkelstein, the judge said, "manifested a total lack of knowledge with respect to pertinent facts."
Black issued a statement saying that "reports of my business demise have been greatly exaggerated. Both Dr. Pordy and I gave sworn testimony that, as in the past, I am making decisions at the company, although as a good chief executive officer I leave the implementation to others. I have been meeting with Dr. Pordy, the chief operating officer, daily, and kept in further touch through my wife, and I have been writing prolific memos all year from home, except for the past few months when I was in the hospital. The record shows Finkelstein hasn't done nearly as well with his companies from his office as I have been able to do from home and the hospital."