Two young Washington brothers who are relatively unknown in the local investment community have been aggressively buying stock in a Baltimore-based hand-tools and aluminum firm with the hope of eventually taking over the company.
Steven M. Rales, 33, and Mitchell P. Rales, 28, who already own about 15.8 percent of Easco Corp. -- or more than 1.12 million shares -- tried to acquire the company two weeks ago for $18.50 a share, or about $171.5 million (on top of the $16.4 million they have already spent for Easco shares).
Easco's board unanimously rejected the proposal as inadequate and sued the Rales and their father, Norman, for violating federal securities laws by illegally obtaining 15.8 percent of the company over the past three months. The suit charges that the sons are acting as a front for their father to shield his business practices from scrutiny.
Despite opposition from Easco, the Rales have not given up. They now are awaiting Federal Trade Commission clearance to buy more Easco shares.
Citing pending litigation, the Rales brothers declined to comment on their six-year old D.C. partnership, Equity Group Holdings. But documents filed with the Securities and Exchange Commission indicate that the young Rales have done quite well for themselves.
Steven Rales, a lawyer, heads the brothers' operations -- a mixture of joint ventures and little-known real estate corporations. He is the oldest of the four brothers who, according to The Miami Herald, have seized control of three public firms or their divisions within the last two years.
The first Rales acquisition was Mohawk Rubber Co., a tire maker based in Hudson, Ohio. Next came Master Shield Inc., a vinyl-siding manufacturer based in Weatherford, Tex., acquired for an undisclosed price. And two years ago, the Rales brothers bought a stake in DMG Inc. of West Palm Beach, Fla., an ailing real estate holding company.
Last January, Steven Rales was elected chairman of DMG after the Rales dethroned the existing management in a bitter proxy battle. In October, DMG acquired Mohawk and Master Shield for $8 million cash, $8 million in convertible subordinated debentures, $1.5 million in notes and 2.6 million shares of stock.
This action raised the Rales' share in DMG to nearly 30 percent. The Rales also agreed to change the company's name to Danaher Corp., after a Montana mountain stream that had been a source of inspiration to some company executives, Steven Rales said in an interview with The Herald last fall.
Mitchell, who is director and executive vice president of Equity Group, handles operations while Steven Rales handles strategy, the older brother has said. Joshua and Stuart, the two remaining brothers, are involved in what some called the "family empire." Josh Rales, 26, works for a family-owned company called RFI Associates, according to The Herald.
Their father, Norman R. Rales, could not be reached for comment. But, according to the Easco complaint, he owns and manages a variety of private businesses, including real estate development companies and building supply companies.
In its complaint, Easco said Norman Rales "has a critical role in the conduct and management of the business affairs of his sons."