Goosemaster
Lifer
McDonald's CEO dies, heir to stay the course
Bell, 42, appointed to continue turnaround
By SHAWN McCARTHY
UPDATED AT 5:43 AM EDT Tuesday, Apr. 20, 2004
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NEW YORK -- James Cantalupo, the man credited with a dramatic turnaround at McDonald's Corp., died suddenly yesterday, forcing the company to scramble to reassure investors that his vision would continue to guide the fast-food empire.
Mr. Cantalupo, 60, died of an apparent heart attack in Orlando, Fla., where he was attending a convention of worldwide franchisees, just 16 months after coming out of retirement to take over the helm of the foundering McDonald's ship.
Within a few hours of his death, the McDonald's board announced that it had appointed Charles Bell, 42, whom Mr. Cantalupo had been grooming as an eventual replacement, to succeed him as chief executive officer.
The board also named former presiding director, Andrew McKenna, as non-executive chairman of the board, splitting the senior jobs Mr. Cantalupo had held.
The appointments came as nervous investors bid down McDonald's shares at the opening of trading on the New York Stock Exchange yesterday.
Within minutes of the market opening, the stock was down 80 cents (U.S.), or nearly 3 per cent, even though the consensus among analysts was that Mr. Cantalupo's untimely death would not have a serious impact on the company's fortunes.
The stock ended the day down 71 cents, or 2.6 per cent, at $26.75, with more than 15 million shares trading hands.
However, several analysts recommended that investors take advantage of any weakness in McDonald's shares as a buying opportunity.
"The news is both sudden and sad," Larry Miller of Prudential Equity Group told clients in a note.
"However, it does not change our thesis on the stock that this company has significant earnings support, which limits downside risk in the shares. We'd be buyers of [McDonald's] shares on weakness."
Bear Stearns analyst Joseph Buckley said Mr. Cantalupo had put in place a respected management team that would maintain the strategic course set by the late chief executive officer. He maintained his view that McDonald's shares would outperform those of its competitors.
"Jim Cantalupo's death obviously adds a new level of uncertainty," Mr. Buckley wrote.
"But the stock is inexpensive, in our view, and we expect the company to stay the course on its turnaround efforts."
McDonald's spokeswoman Anne Rozenich said yesterday that she did not believe that Mr. Cantalupo had had previous health problems.
McDonald's -- which has been criticized for a fast-food menu that contributes to obesity and other health problems -- last week unveiled its balanced lifestyles program, which promotes healthy food choices and exercise.
Mr. Cantalupo, who was married with two grown children, was a former president of McDonald's International whom the board lured back to lead the company early last year after it had fallen on hard times.
Between 2000 and 2002, the company posted poor financial results, with a 50-per-cent drop in profit including its first-ever quarterly loss in 2002.
Its stock lost more than half its value, sliding from a high of $26.50 in December, 2001, to a low of $12.12 on March 12, 2003.
Last week, McDonald's announced preliminary results that saw profit up 38 per cent compared with the first quarter of 2003, and revenue up 10 per cent, after adjusting for currency changes. Revenue from U.S. operations were 14 per cent higher than they were in the first quarter of 2003.
Mr. Cantalupo is credited with the expansion of the McDonald's menu to include healthier choices, including premium salads and bunless burgers.
While the menu changes and a global advertising campaign featuring hip-hop rhythms caught the public eye, the CEO and his management team were driving more fundamental changes to the way McDonald's operates.
He slammed the brakes on plans for new restaurants and concentrated instead on refurbishing and increasing sales at existing ones through the worldwide empire.
He introduced tough new standards for McDonald's franchisees, who are expected to maintain higher levels of quality and cleanliness and face more unannounced inspections.
Those strategies paid huge dividends and the 15,000 operators, who gathered in Orlando expecting a weeklong love-fest, were clearly in mourning yesterday for the man who had led the revival of their brand.
And they expect nothing less from Mr. Bell, an Australian who joined McDonald's as a teenager working on the grill and rose to become one of its youngest managers ever. He began as a part-time crew worker in Sydney and moved on to become Australia's youngest store manager at 19, vice-president at 27 and a member of the Australian board of directors at 29.
He had served as president of McDonald's Asia-Pacific and McDonald's International before moving to corporate headquarters three years ago. Until yesterday, he was chief operating officer for the chain.
Observers credited Mr. Cantalupo and the McDonald's board with having a succession plan in place, although with the intent of Mr. Bell getting some more seasoning.
"At a time like this, continuity is critical," said Harvard University management professor William George, who is former chairman and CEO at Medtronics Inc. and current director on a number of boards.
The quick and reassuring appointments from the McDonald's board, he said, were "a sign of very good governance and that their plans were all in place."
Poor Guy. not a good way to go
