Deltona's fortunes rose until the late 1970s, when a failed plan to develop environmentally sensitive Marco Island set it on a downward spiral. By 1992, the company owed the state $5 million to meet escrow requirements and another $2 million in back taxes.
That year, a group of European investors funded by Belgian businessman Antony Gram purchased the company's bank debt for 43 cents on the dollar and acquired a controlling interest in the company's stock. Now chairman and CEO of Deltona, Gram owns 73.23% of the company's shares through two companies he controls, Yasawa Holdings N.V., a Netherlands Antilles corporation, and Selex International B.V., a Netherlands company. In 1998, he moved Deltona's headquarters from Miami to Ocala, closer to the company's holdings.
As the company faded, so did its stock, which has hovered around 30 cents a share, with trading relegated to the over-the-counter desks. Some stockholders kept the faith, however, convinced that Deltona's holdings -- including thousands of acres in northwest Florida -- held a bright future for the company. "I figured that with the land values, the stock was cheap," says Fred Davis, a Deltona shareholder who lives in Henderson, Ky. Davis bought his 145,000 shares at prices ranging from 25 cents to $4.50.
Deltona, meanwhile, began showing signs of life. Development in northwest Florida is surging, and in 2001, Deltona posted an annual profit of $352,000 -- its first since 1992 -- on revenue of $14.1 million. Land sales totaled $9.96 million, up 46% from 2000 and more than double the $4.9 million in land sales in 1999. "The company for the first time in decades is earning money," says Miami Beach shareholder Alexander Rubin, a retired lawyer who specialized in real estate and advised the Mackle brothers.
Last December, however, Davis, Rubin and other shareholders were jolted by news from Deltona: The company announced a highly unusual 1-for-500,000-share reverse split in which shareholders will receive one new share of Deltona stock for each 500,000 old shares they own. Those with fewer than 500,000 shares will receive 40 cents a share, 2 cents more than Deltona's recent trading price.
The terms mean the company will buy out all but two stockholders -- the companies controlled by Gram -- and effectively take Deltona private. "It puts the assets in the hands of a few people," says Bill Nortman, a partner with Akerman Senterfitt in Miami and former head of the Securities and Exchange Commission's Miami office.
The disgruntled shareholders believe the reverse split is a ploy by Gram to cut other shareholders out of future profits -- cheaply -- as Deltona is on the verge of a revival. When Davis heard the offer, "I felt like I was getting robbed," he says.
By Rubin's calculations, Deltona's stock is worth closer to $5 a share, not 40 cents. In a letter to Gram, he characterized the 40-cents offer as "shocking, offensive and illegal."
To make their point about Deltona's value, Rubin and Davis point to Yasawa's 1997 purchase of 6.8 million shares of Deltona stock for $1 a share at a time when the stock was trading publicly for less than 50 cents a share.
TAKING SIDES
Disgruntled shareholders argue that with Sunny Hills' lots selling for $3,500, the value of the company's 13,221 lots is more than $46 million.
The company counters that more than 12,500 unimproved Sunny Hills lots will require an estimated $3,500 per lot to add roads and drainage, putting the total value of the lots at Sunny Hills and the 3,095 lots at Marion Oaks at $7.9 million.
Deltona's Land HoldingsDevelopmentLotsImproved*Sunny Hills
(35 miles north of Panama City)13,221685Marion Oaks
(12 miles southwest of Ocala)3,0951,024*Roads and drainage added
Taking action
The shareholders aren't sitting still; they've contacted the Securities and Exchange Commission. Both Rubin, the father of former U.S. Treasury Secretary Robert Rubin, and his broker, Bruce P. Cotten, sent written complaints to the agency. Davis and another longtime shareholder, Michael Putrynski of Kenosha, Wis., voiced their opposition to the deal using the SEC's online complaint forms.
Neither Gram, 60, who also is managing director of Gramyco, a scaffolding company based in Belgium, nor a Deltona spokesperson would comment on the reverse-split proposal. In documents filed with the SEC in December 2001 and last September, the company says it wants to go private "to relieve the company of the costs and detriments of remaining a public company."
In addition, the proxies advise that because of the company's continuing losses, the common stock is thinly traded and has provided very little liquidity -- particularly for large shareholders.
For shareholders like Rubin and Davis, the biggest objection to the offer is based on how Deltona values its land. The company's acreage primarily in northwest and central Florida -- is on the books at its original purchase price of about $200 to $300 an acre. On its 2001 balance sheet, Deltona pegs the value of its land at $7.9 million.
Deltona's major holdings are in two residential developments -- Marion Oaks, 12 miles southwest of Ocala, and Sunny Hills, in northwest Florida's Washington County. Most of Deltona's land is at Sunny Hills, about 35 miles north of Panama City, where the company owns more than 13,200 lots, only 685 of which have roads and drainage. The community's slogan: "The Dream Begins Here."
Promising future
Sunny Hills remains an isolated group of about 500 homes scattered among undeveloped lots, but its prospects could be bright. St. Joe Co. has begun developing its massive holdings in the region, and a new, larger Panama City-Bay County International Airport is planned just 12 miles north of Panama City -- about 10 minutes from Sunny Hills.
After years of very little activity, Deltona opened model homes on State Road 77, the main highway through the area, in March. Houses are priced from $88,000 to about $120,000, not including lots, which sell for $3,500 and up, says Hulan Carter, general manager of Sunny Hills.
Deltona's disgruntled shareholders argue that if the lots are selling for $3,500, the value of the company's 13,221 lots is more than $46 million -- almost six times the $7.9 million Deltona lists on its balance sheet. In his letter to Gram in February, Rubin argues that Deltona's land is worth some $73 million.
Deltona, in its September proxy, counters that more than 12,500 of the Sunny Hills lots are undeveloped and will require an estimated $3,500 per lot in improvements such as roads and drainage.
In its filing, Deltona says that in 2001 it got an offer of $10.5 million -- less than $800 a lot. The company says its board would have accepted the offer but couldn't reach a deal with the prospective buyers.
The SEC -- which has its hands full these days investigating Enron, Tyco, WorldCom and others -- does not evaluate the price of reverse stock splits, concerning itself primarily with what a company discloses and how it conveys that information to shareholders. "They don't make business judgments," says John Fletcher, a partner in the Miami office of the Morgan Lewis law firm.
As a rule, the SEC doesn't comment on any pending investigations. Apparently it has contacted Deltona about the matter, however: In September, Deltona said it resubmitted amended documents on the reverse split "addressing (the SEC's) inquiries," according to Executive Vice President Sharon Hummerhielm.
Deltona has scheduled its annual meeting on Dec. 10, but the vote on the reverse stock split has been postponed until the SEC's review is complete.
Davis says he doesn't want to lose his stake in a company he still believes in. "I feel cheated on the price and have to take the money. I still don't want the 40 cents," says Davis. The reverse split will mean that Gram "can sell it and we don't benefit."