Knight Ridder/Tribune Business News
Dec. 22, 2004 - In the first sign of thawing in a two-year legal battle, members of the Pritzker family are working toward a settlement with the two youngest grandchildren of patriarch A.N. Pritzker, who were virtually cut out of the $15 billion family fortune.
Negotiations for a settlement of the lawsuit filed by Liesel and Matthew Pritzker are described as "serious" by sources close to the talks.
A settlement appeared within reach late last week, sources said, but some Pritzker family heirs apparently thought the offer to the grandchildren was too rich. The negotiations have been complicated by the interests of several factions on the Pritzker family side, which includes a number of cousins who are unhappy with how much some family members paid themselves to run the business.
The talks have taken a hiatus for the holidays and are expected to resume next month. Attorneys for the various parties in the case could not be reached for comment.
Settlement of the highly publicized case would help clear the path for the Pritzkers to take public its crown jewel, the Hyatt hotel chain.
Speculation about an initial public offering has simmered since late 2001, when the family agreed to a plan to split up its diverse business empire among 11 heirs within 10 years. The agreement was reached after the death in 1999 of Jay Pritzker, who had assumed the patriarch role from his father, A.N. Pritzker, who died in 1986.
"If we see lawsuits clearing up now, it's a sure sign that a company is thinking of going public," said Tom Taulli, co-founder of CurrentOfferings.com. "Investors don't like outstanding litigation overhanging an IPO.
"And it could be great for someone who's looking for a settlement," Taulli added. "They may get more than they thought they would get. A lot of gamesmanship goes on."
Hyatt officials were unavailable for comment Tuesday.
Thomas Pritzker, Hyatt Corp.'s chairman and chief executive, said in a recent interview that the family has been weighing an initial public offering, but does not expect to make a decision within the next year.
While the Pritzker clan doesn't mind receiving publicity for its extensive charitable giving, it has long guarded its privacy and shielded its business affairs from scrutiny.
So it was a startling development in December 2002 when Columbia University student Liesel Pritzker sued her father, Robert Pritzker, her cousin, Thomas Pritzker, and other members of the family, alleging they had stripped her and her brother's trust funds of $1 billion each in assets. Among those assets was a 10 percent share of Hyatt Corp., which was transferred to the family's charitable Pritzker Foundation. Other assets were given away or sold to trust funds benefiting Liesel's and Matthew's cousins and half-siblings.
Attorneys representing Robert and Thomas Pritzker don't deny the transfers took place, but they say that Robert had the power to take such actions after he became the trustee of the funds.
Attorneys for Liesel and Matthew argue that Robert acted out of malice because he was angry at his ex-wife and Liesel, an actress who was pursuing a film career without his approval. By emptying the funds, Robert violated his fiduciary duty to act in the best interests of the trusts' beneficiaries, in this case his own children, they allege.
In September, Cook County Circuit Court Judge Patrick McGann dismissed the allegations against Matthew's and Liesel's cousins and half-siblings as well as the Pritzker Foundation because their roles were limited to receiving the assets.
The judge also has ruled that Matthew, 22, and Liesel, 20, may not seek punitive damages.
But the suit is going forward against Thomas and Robert Pritzker, as well as Marshall Eisenberg, a family attorney, because they were trustees of Matthew and Liesel's trusts.
Meanwhile, in another Cook County courtroom, the Pritzker family has been trying to quietly iron out the final details of a fiercely guarded family settlement agreement that would break up the Pritzker empire.
The case was known to only a handful of people for a year and a half because the court file was sealed at the beginning of the case and the parties were identified only by their initials.
The suits are indirectly tied because if Liesel and Matthew's trust funds were restored, that would reduce the amount of money that would be divided among the other heirs.
After the case involving the breakup of the Pritzker empire became known, the Chicago Tribune intervened and attempted to get the case file unsealed, citing the public's interest in open access to the courts. That request was denied by Judge John Madden, who has since retired from the bench, and it is now on appeal before the Illinois 1st District Appellate Court.
In late November, the appellate court stayed further action in the lower-court case and agreed to expedite its ruling on the Tribune's appeal.
Settling the quarrel with Liesel and Matthew would help the Pritzker clan proceed with its plans to break up its $15 billion business conglomerate.
Meanwhile, Hyatt, which operates 214 hotels and resorts worldwide, has taken a number of steps recently that would better position the company to go public, should the family choose that route.
On Dec. 9, it announced it would purchase the AmeriSuites hotel chain, which would add a midrange product to Hyatt's premier luxury brands. Terms of the all-cash deal were not disclosed, but the purchase price is likely to be in excess of $600 million. The transaction is expected to close next month.
In addition, a corporate restructuring will be completed by year-end, putting all of Hyatt's hospitality businesses under a newly created Global Hyatt Corp.
Before deciding whether to approach Wall Street, Hyatt wants to improve its rate of earnings growth, which is not at the level investors like to see, Thomas Pritzker said in the earlier interview.
"And that's where AmeriSuites fits in," he said.
By Kathy Bergen and Susan Chandler.
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