Thursday, January 5, 2006
By Timothy J. Gibbons, The Times-Union
The largest employer at Cecil Commerce Center has been sold to its employees, with the two Navy veterans who founded the company 28 years ago now looking forward to a retirement filled with travel and skiing.
Stock in LSI Inc. was purchased for an undisclosed amount by a trust, which will distribute the shares to employees over the next several years as part of a transaction known as an Employee Stock Ownership Plan.
The owners, who started the company to train military forces in other countries that had purchased U.S. aircraft, said they decided to sell to the employees rather than large military contractors who had expressed interested because they wanted to preserve the culture that had developed there.
“Jim and I founded the company,” said former owner Michael McKenny, referring to co-founder Jim McKinney, “but these guys have been doing the work and they deserve the major benefits.”
Starting with four employees in 1978, LSI now has almost 500 employees, with about 400 of them working out of Cecil, the former military base on the Westside. The company now handles a variety of military training, and recently won contracts to develop curriculum for the U.S. Army and to create training programs for the military’s new fighter jet, the F-35 Joint Strike Fighter, which will be used by armed forces around the world.
Employee Stock Ownership Plans, or ESOPs, are a typical way for founders of a company to sell all or part of a business while taking care of employees, said Michael Canan, an attorney with Gray Robinson in Orlando and Florida vice president of The ESOP Association, an educational organization.
Typically, the company takes out a loan to buy ownership shares from the original owners and then, as it pays off the loan, it distributes the shares to employees based on how much they make. The transfer has certain tax benefits for both the company and the owner who is selling it, Canan said.
“Michael and I could not be happier with the ending,” McKinney said. ” I feel like I’m selling one of my children, but you can’t stay forever.”
Following the sale of the company, which officially closed Tuesday night, LSI’s executive teams was slightly reshuffled, with Phil Voss moving from corporate vice president to chief corporate development officer and Charles Johns moving from chief operating officer to chief executive officer. Those two, as well as Chief Financial Officer Warren Rosander will constitute the company’s new board of directors, which was appointed by the trust.
The growth of companies such as LSI helps Jacksonville attract other military-related companies, said James Amerault, chairman of the Jacksonville Regional Chamber of Commerce’s military affairs task force. “There are many senior (military) officers … who like it very much here,” he said. “They want to stay. When they get out, there wouldn’t be enough work related to the military they could find if there weren’t companies like this here.”