How Big Can a Family Business Be?

Craig Aronoff

The family of Wal-Mart founder Sam Walton continue to be a powerful force in that business.  Son Robson Walton continues as board chairman of the $190,000,000,000 annual sales company.  When Sam Walton died nearly 20 years ago, the family retained about 38% ownership of the company.  Since 2003, the company has used spare cash for a series of significant stock buybacks.  Family shareholders continue to hold their positions which public shareholders have opted for the money.  As a result, the family’s holdings have grown to 49%.  Recently, a new $15 billion buyback was announced.  At current share prices, assuming the family neither sells nor buys additional shares and that the offer is fully subscribed, the family’s share will climb to 53%.

When a family owns a majority of a listed company’s shares, New York Stock Exchange rules no longer require that the majority of the board be independent.  Some investors and pundits are complaining that the family will in effect be saying “trust us,”  preferring a larger dividend rather than making funds available to repurchase shares.  Of course, those who are unhappy with the situation can be among those who accept the offer.

In growing the largest company in the world (barring fluctuations in oil prices that impact energy company revenues), the Waltons have shown themselves to be outstanding stewards.  Investing along side of them have made lots of folks lots of money.  Betting on this family company’s success has given investors a ride from an Arkansas variety store, to the biggest business (and the biggest family business) there is.

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