Scholastic bought $11.5m of its own stock back from its late chairman's estate, and the chair of its board is one of the estate's two executors
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Read the fifth paragraph of the filing before the first.
Scholastic Corporation disclosed on Thursday afternoon that it bought 289,624 of its own common shares from the estate of M. Richard Robinson, Jr., its former chairman and chief executive. The purchase settled on 26 August at $39.7603 a share, a total of $11,515,537.13, and the price was a 3 percent discount to the $40.99 close on the day the agreement was signed.
The estate has two preliminary co-executors. One of them is Iole Lucchese, who chairs Scholastic's board, serves as its executive vice president and chief strategy officer, and runs Scholastic Entertainment. The other is Andrew S. Hedden, the company's senior counsellor.
What the company did about that
It disclosed it, and it built a process around it before the money moved.
The audit committee, which the filing states consists entirely of independent directors with no financial interest in the transaction, recommended the purchase. It took outside counsel and retained an independent financial advisory firm. The board then approved the deal without Lucchese participating.
The committee's stated reasoning runs to eight enumerated factors, and they are ordinary treasury considerations rather than a defence of the counterparty: capacity under the existing programme, the small volume the company can buy under its Rule 10b-18 open market plan, available cash, a wish to offset dilution from share based compensation, the dividends saved on retired stock, and no brokerage fee to pay.
The numbers
The shares are about 1.6 percent of the common stock outstanding before the deal, against the 18,136,664 common shares the company reported outstanding on 24 July. The purchase came out of an existing $300m authorisation and leaves about $158.9m of it. Counting this transaction, the company has repurchased 590,895 shares so far this fiscal year, which means this single private block is very nearly half the year's buying.
The estate has told the company it will use the proceeds to meet certain obligations. The filing does not say what they are.
The class that matters is the one that did not move
Nothing here transferred Class A stock, and at Scholastic that is the whole of the point.
The company's proxy statement, filed on 7 August, sets out the structure. There were 828,100 Class A shares and 18,136,664 common shares outstanding on the record date of 24 July. Under the certificate of incorporation the Class A holders, voting as a class, fix the size of the board, elect all the directors subject to the common holders' right to elect at least one fifth of them, and exercise every other voting right to the exclusion of the common. At the annual meeting on 16 September the Class A holders elect eight directors and the common holders elect three.
The same proxy reports the estate holding 445,452 Class A shares, which is 53.8 percent of that class.
So the estate sold from the class that trades and kept the class that decides. Read that way the transaction is a liquidity event at the edge of a control position rather than any change to it, and the disclosed need to meet obligations is the part that suggests there will be more of them. Each one will arrive with the same questions attached, and this filing is a reasonable template for the answers: name the committee, name who stepped out of the room, and say whether an independent adviser was paid to look.
