The Wall Street Journal offers a fascinating look at what really happened last week when Cushman & Wakefield CEO Glenn Rufrano stepped down. The Journal is offering the article to all readers - for now.
Below is an exerpt from the article. To read it in its entirety, click here.
Cushman's Ins and Outs
By —Peter Grant and Anjali Athavaley
The biggest question in New York's commercial real-estate industry last week was what was behind Cushman & Wakefield's surprise announcement that Glenn Rufrano was stepping down as chief executive.
While the company and Mr. Rufrano remain circumspect, the answer seems to reflect what's going on at Cushman's parent company, Exor SpAEXO.MI +2.84% of Italy, as much as it shows what's happening at the storied New York-based real-estate firm. Exor, a huge investment company that also owns a controlling stake in Fiat SpA,F.MI +1.34% acquired a 67.5% stake in Cushman for $563 million in 2006 and since then has increased its ownership to 72%.
Up until last week, the relationship between Exor and Mr. Rufrano seemed to be solid. Exor hired Mr. Rufrano, a turnaround expert, to run Cushman & Wakefield in 2010 and backed him as he expanded the company globally. The parent company allowed Mr. Rufrano to reinvest profits along the way.
But Exor has other concerns besides Cushman. As these other pressures mounted, Exor called on Cushman to pay the parent dividends rather than reinvesting the money into the business. That set the stage for Mr. Rufrano's departure.
The parent's biggest concern lately has been Fiat's desire to purchase the 41.5% stake it doesn't already own in Chrysler Group LLC. Indeed, Fiat suspended its dividend earlier this year partly because it wanted to conserve cash.
Exor itself has been raising cash partly by selling assets. For example, earlier this month, Exor said it was selling its 15% stake in Swiss inspection company SGS SA for $2.6 billion.
As far as Cushman goes, it started paying Exor a dividend this year. Exor pointed out in a statement that a large amount of the company's earnings over the last three years has been "re-invested in the business" and that Exor expects "rigorous capital discipline" from the management teams of its companies.
But some might argue that Cushman can't afford to pay Exor dividends in today's competitive environment. Despite its progress, Cushman still has a long way to go to close the gap globally with rivals CBRE Group Inc. CBG +0.31% and Jones Lang LaSalle JLL +0.10% .
Indeed, analysts say CBRE and Jones Lang have been growing faster than Cushman because they have larger presences around the world. They've also done well at building businesses that aren't dependent on sales and leasing commissions.
"In 2012, Cushman didn't grow as quickly partly because of the greater global bandwidth of those two organizations," says William Marks, an analyst who follows real-estate companies for JMP Securities JMP +0.93% .For the rest of the story, click here.