Bill Marriott by Dale Van Atta

Author:Dale Van Atta
Language: eng
Format: epub
Publisher: Shadow Mountain Publishing
Published: 2019-06-26T21:58:31+00:00

Gary Wilson.

Wilson wanted to double down on the stock repurchase program, and he made a pitch at the January 1980 board meeting. Knowing the massive risk Bill was on the verge of taking, Checchi tried to lighten the mood. In Bill’s private copy of the presentation, he included a picture of Bill taken at the Seattle hotel opening, sitting in a canoe floating in a swimming pool, wearing a Native American headdress. The caption read: “What? Me worry?”

Wilson offered four alternatives to the board: “internal expansion,” paying cash dividends, acquiring more businesses (Wilson suggested that Marriott could double in size by acquiring the ailing Walt Disney Company), or buying back more company stock. Wilson maintained that the latter was the best use of the money. Bill had been briefed beforehand on what Wilson would recommend, and he backed the stock purchase. Both J.W. and Allie were absent because of illness. When the presentation was over, the board gave unanimous consent to the stock purchase plan.

“What Bill approved would amount to the largest share buyback in American corporate history,” recalled Checchi. On January 29, 1980, the company announced a tender offer for up to 10.6 million shares of its common stock at $23.50 a share. By the time the offer expired a month later, on February 28, tenders for 7.5 million shares were accepted and paid for. Bill came back to the board and asked for authorization to buy on the open market the additional three million shares not purchased during the tender offer’s time limit. J.W. was present for this board discussion, and he vehemently argued against the whole idea of buying back stock. But when he saw which way the wind was blowing, he and Allie abstained from the vote, which was otherwise unanimous. “He was crushed to be outvoted,” Allie recorded.

It turned out to be an unnecessary tempest in a teapot. Just five days after the board meeting, Bill voluntarily shut down the repurchase program because Marriott stock had risen so much it then exceeded the “bargain” price Marriott had been paying. When it was over, the investment world was surprised to realize that in less than a year the Marriott company had bought back 12.5 million of its own shares—or one-third of the company’s common stock.

A historic precedent was set, and the Marriott move began to have a hidden but seismic impact on the corporate finance world as well as on the company itself. At the annual meeting held two months after the stock repurchase, Bill spoke to the stockholders in terms that went against everything his conservative father believed about debt. “In a time of high inflation, our company should maintain a prudent level of debt. Not only is long-term debt repayable in cheaper dollars, but interest on debt is tax deductible. This makes debt the cheapest form of capital available to us.”

One of Wilson’s lieutenants at the time, John Dasburg, maintained that what Wilson dreamed up, and Bill implemented, changed the way American corporations operated. “That major stock repurchase was very novel at the time in the American corporate environment.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.