Harvard Will Buy Company For $442M

In what appears to be the largest single allocation of Harvard's lofty $11 billion endowment, Harvard has agreed to deal out $442 million to purchase a publicly-owned, diversified holding company, the White River Corporation.

The Harvard Private Group, Inc. (HPG), which manages some of the endowment as a subsidiary of the Harvard Management Company (HMC), would probably acquire White River this summer, said Tami E. Mason, vice president of HPG.

This marks one of the largest takeovers ever by a non-profit organization.

White River's board of directors announced Tuesday its decision to recommend the acquisition to its shareholders.

Mason said the agreement is now "subject to shareholder approval." They will meet to vote on the board's recommendation.

This is the second time in the span of a week Harvard has significantly realigned its endowment funds. Jonathon S. Jacobson resigned from HMC taking with him to his new investment firm $500 million in Harvard funds, making the University the firm's largest client.

White River, based in White Plains, N.Y., serves insurance and automobile companies through vehicle valuation and accident estimating and by providing software. It also works in the sale, design and distribution of fashion accessories.

A similar deal between Harvard and White River, negotiated for $400 million, was reported by the Wall Street Journal in December.

Mason refused to comment on the connection between the two agreements, or the reasons for the delay.

Financially, White River remains healthy with a 328.9 percent revenue growth rate over the past three years. The corporation's assets number $354.5 million.

But Albert F. Gordon '59, a retired investment banker, pointed to White River's $4.4 million net income for 1996 as an indication that Harvard paid dearly for a corporation worth much less.

Based on its assets and income, Gordonestimated the market price of the corporation at$80 million.

"Harvard is probably paying a premium. They doa lot of things they never explain and a lot ofthings they've lost money on," Gordon said.

Jack R. Meyer, president of HMC, refused tocomment at all on the acquisition, and Harvardofficials questioned would not give details aboutthe agreement or explain the reasons behind thepurchase.

Gordon, a former securities analyst for KidderPeabody and Marcus Schloss and a donor to theUniversity, said Harvard will be able to cover itstracks if this turns out to be a losingproposition.

"This is a way to overstate their earnings ifWhite River does badly," he said.

Harvard can take 20 percent of the earningsfrom another source and add them to White River'sas reserve to make the corporation's profitsappear higher, Gordon said.

Harvard and White River officials wereoptimistic about the acquisition.

"We're extremely pleased by the decisionreached by White River's board of directors,"Mason said. "We worked on the transaction for along time, and we're looking forward to getting itclosed."

Harvard approached White River with the offer,according to Michael E. B. Spicer, chief financialofficer of White River.

"The original Harvard proposal was anunsolicited bid," he said. "But it was attractiveenough for the White River board to look at it."

Spicer added that Harvard will give eachshareholder $90.67

Based on its assets and income, Gordonestimated the market price of the corporation at$80 million.

"Harvard is probably paying a premium. They doa lot of things they never explain and a lot ofthings they've lost money on," Gordon said.

Jack R. Meyer, president of HMC, refused tocomment at all on the acquisition, and Harvardofficials questioned would not give details aboutthe agreement or explain the reasons behind thepurchase.

Gordon, a former securities analyst for KidderPeabody and Marcus Schloss and a donor to theUniversity, said Harvard will be able to cover itstracks if this turns out to be a losingproposition.

"This is a way to overstate their earnings ifWhite River does badly," he said.

Harvard can take 20 percent of the earningsfrom another source and add them to White River'sas reserve to make the corporation's profitsappear higher, Gordon said.

Harvard and White River officials wereoptimistic about the acquisition.

"We're extremely pleased by the decisionreached by White River's board of directors,"Mason said. "We worked on the transaction for along time, and we're looking forward to getting itclosed."

Harvard approached White River with the offer,according to Michael E. B. Spicer, chief financialofficer of White River.

"The original Harvard proposal was anunsolicited bid," he said. "But it was attractiveenough for the White River board to look at it."

Spicer added that Harvard will give eachshareholder $90.67