Ronald Perelman – Finance & Investment

Ronald Owen Perelman (born January 1, 1943) is a wealthy American investor and businessman who made his fortune buying beleaguered corporations and selling them later for an enormous profit. Despite his wishes to the contrary,[1] Ronald Perelman has constantly found himself in the headlines because of his billion-dollar businesses and million dollar divorces. His collection of businesses has included such household names as Revlon, Technicolor, and Hummer, to name a few. He is currently listed at the 104th richest person in the world on the Forbes The World's Richest People, with an estimated wealth of USD$7 billion,[2] dropping ten positions from the previous year.[3]

Contents

1 Early life

2 Notable business

2.1 Belmont Industries

2.2 Initial deals

2.3 Technicolor

2.4 Michael Milken

2.5 Revlon

2.6 Savings and loans

2.7 Marvel

2.8 Television

2.9 Coleman and Sunbeam

3 Major lawsuits

3.1 Morgan-Stanley

4 Personal life

4.1 Marriages

4.1.1 Faith Golding

4.1.2 Claudia Cohen

4.2 Cigars

5 References

6 External links

Early life

Ronald Perelman was born in Greensboro, North Carolina to Raymond and Ruth Perelman.[4] Raymond was an accomplished businessman in his own right. Along with his father and brother, he controlled the American Paper Products corporation.[5] Raymond eventually left the company and bought Belmont Iron Works, a manufacturer of structural steel.[5]

It was on Raymond's knee that Ronald learned the fundamentals of business.[6] By the time Ronald turned eleven years old he was already sitting in on the board meetings of his father's company.[4] However, life was by no means easy for Ronald. Raymond was a rough teacher, harshly criticizing Ronald for even the slightest misstep.[7]

Ronald Perelman attended The Haverford School. After graduation, he went to the Wharton School at the University of Pennsylvania where he followed in his father's foot steps and majored in business. After completing his degree, Ronald took a break from schooling to go to Israel. It was during this break that he met the woman who would become his first wife, Faith Golding.[4] He returned to the University of Pennsylvania and in 1966 he graduated with a master's degree from the Wharton School.[8]

Notable business

Belmont Industries

Ronald Perelman was raised in the board room and so it is unsurprising that he brokered his first business deal very early in life. His first major business deal took place in 1961 when he was a freshman in college. After being put on the scent of the Esslinger Brewery by his father, Ronald turned his attention to the details and found it to be an excellent deal. He and his father bought it for $800,000. They sold it three years later for a $1 million profit.[4]

Throughout Ronald's tenure at the Belmont Iron Works(Later renamed Belmont Industries) he assisted his father on many more deals, earning millions of dollars in the process. Their general strategy was to purchase a company, sell off superfluous divisions to reduce debt and generate profit, and bring the company back to its fundamentals. In 1978, twelve years after Ronald Perelman formally joined Belmont Industries, Ronald Perelman was the vice president but he was still agitating for more power and influence in the company. Raymond told Ronald that he had no intention of stepping down anytime soon. Ronald resigned and moved to New York. The two barely spoke to one another for the next six years.[4]

Initial deals

The first deal Ronald Perelman orchestrated free of his father's influence was his purchase of Hatfield Jewelers in 1978. Recognizing the enormous value of its mismanaged jewelry cache, he bought control of the company with a $1.9 million loan from his wife, Faith Golding. Within a year, Perelman had sold off all of company's retail locations and reduced the company to its lucrative wholesale jewelry division, earning himself $15 million.[4]

His next target was MacAndrews & Forbes, a distributor of licorice extract and chocolate. He was repeatedly rebuffed by the management and investors, who filed a lawsuit to try and block his purchase, but they were unsuccessful, allowing him to acquire the company. His success was particularily sweet because his father had tried and failed to acquire it ten years earlier.[4]

Technicolor

Perelman's first two takeover targets of 1982, the Richardson Company and Consolidated Cigar,[9] both successfully drove him off. The third time was the charm and he bought Technicolor for $119 million. Ronald Perelman was sued by a disgruntled shareholder to try and stop the deal. The lawsuit lingered for years, alleging that he had dramatically underpaid for the company. A second suit was later filed alleging that Ronald Perelman had bribed the board members to accept the deal and that they should have sought out better offers.[4] The suit haunted Perelman until 1995 when it was put down by the Delaware Supreme Court who unanimously ruled in Perelman's favor on all counts.[4]

Michael Milken

Ronald Perelman's main objective of 1984 was taking MacAndrews & Forbes private. Nine lawsuits were filed against him in an attempt to stop him, all of them alleging that the deal was only in the best interests of Ronald Perelman and not the majority of the shareholders. The lawsuits all flopped and Ronald Perelman succeeded in taking the company private for $52.7 million. What makes the deal notable is not the amount of money involved, but how it was raised. Ronald Perelman raised the money with MacAndrews & Forbes junk bonds sold through Michael Milken's company Drexel Burnham Lambert. At the time, it was one of the largest deals of its kind. The deal marked the beginning of a long relationship between Ronald Perelman and Michael Milken.[4]

Revlon

Main article: Revlon

In 1985, Ronald Perelman took on his biggest deal yet: The Revlon Corporation. Financed with over $700 million in junk bonds from Michael Milken, Perelman offered to buy any or all of Revlon's 38.2 million outstanding shares for $47.5 a share when it was selling for about $45 a share. Initially rejected, he repeatedly raised his offer until it was up to $53 a share. Forstmann Little & Company swooped in at $56 a share and a brief public bidding war ensued. Ronald Perelman ended up paying $58 a share. Along with $900 million in other costs(Legal fees, investment bankers, etc), acquiring Revlon cost him about $2.7 billion. Unfortunately for Perelman, Revlon has been nothing but trouble. Despite Perelman's regular cleansings up upper management and dumping millions of dollars into it, Revlon has stubbornly refused to turn a profit. As of first quarter 2007, it has had one profitable quarter in its past 32.[10] Its lack of profitability shows in its stock price which has slumped to less than 1.50 a share as of 2007.[11] A major cause of its financial problems is the huge debt load stemming from .[12]

Savings and loans

In late 1988, amid rumors that he was pursuing everyone from the Coca-Cola Company to Disney, Perelman made the most profitable move of his career: He bought five insolvent Savings and Loan banks in Texas, involving himself in what became known as the Savings and Loan crisis. He bought control of over $12 billion of assets for $315 million, in addition to billions in financial guarantees from the government and a tax shelter that he used well into the 21st century to shield the profits of his many companies. He later added another $890 million of S&L assets for $10 million, again gaining various government guarantees. In the first year of operation, the banks generated $250 million dollars in profit and tax perks for Perelman. His profits had not escaped scrutiny from congress who were raising allegations of abuse of the program. Perelman proceeded to donate over $100,000 to various congressional campaigns, but he still ended up losing millions in tax benefits he had been counting on. In 1992, Perelman sold off most of his S&L conglomerate(He had combined them all into one company called First Gibraltar Bank) to Bank of America for $1 billion, but he held onto four branches for tax purposes.[13] In 1994, Perelman purchased another S&L from Ford Motors for $1.2 billion of cash and assumed debt. After a merger and a buyout by Citigroup, his personal stake is worth $1.6 billion.[13]

Marvel

While the S&L crisis was drawing national attention, in 1989 Ronald Perelman made a move that left many analysts scratching their heads. He bought the Marvel Entertainment Group, the parent company of Marvel Comics, from New World Entertainment for $82.5 million. "It is a mini-Disney in terms of intellectual property," said Perelman. "Disney's got much more highly recognized characters and softer characters, whereas our characters are termed action heroes. But at Marvel we are now in the business of the creation and marketing of characters."[14] He went to work immediately and Marvel's profits immediately spiked, boosted by a massive merchandising effort, an increase in Marvel comic prices, and an overall boom in the comic book industry. Perelman later added the Fleer Corporation, SkyBox International, the Panini Group(An Italian sticker manufacturer), Welsh Publishing, and Malibu Publishing for a combined total of $700 million.[15] Investors around the world recognized his efforts and generated $80 million for Perelman when he issued an IPO for Marvel. He later added a significant stake in Toy Biz to Marvel's holdings. Unfortunately, his luck was not to last. Marvel's attempt to distribute its products directly lead to a decrease in sales and aggravated the losses Marvel suffered when the comic book bubble[16] popped and the 1994 Major League Baseball strike massacred the profits of the Fleer and Panini divisions.[17] A major bondholder, Carl Icahn, fought to take control of the company from Perelman. Both men failed as Ike Perlmutter and Avi Arad swooped in and snatched Marvel from Perelman and Icahn in order to protect their own financial interests. What Perelman made off of the deal is disputed. Chuck Rozanski estimates that Perelman made $200-400 million off Marvel while Forbes thinks Perelman made nothing.[15][13]

Television

Main article: New World Communications

In 1989, Perelman went back and bought New World Entertainment, the same company he bought Marvel from. He then bought Four Star International. In 1993, Perelman bought SCI Television for $120 million plus $730 million in assumed debt, acquiring seven television stations in the process. HIs second major purchase of '93 was Genesis Entertainment. His final television-oriented purchase in 1993 was Guthy-Renker. In late 1993, all of the above-mentioned companies were reorganized into a single corporation called New World Communications. In 1994, he bought four more stations from the Great American Communications Company for $360 million and four more from Argyle Television Holdings for $716 million. These purchases set the stage for the Fox affiliate switches of 1994 in which Ronald Perelman rewrote the rules for how television affiliates operated and helped establish Fox as a force to be reckoned with.

Coleman and Sunbeam

In between his purchase of Marvel and New World Communications, Perelman bought the Coleman Company for $545 million. Perelman performed his usual magic, selling off everything but Coleman's camping and boating divisions. Over the next several years, he bought nine more divisions for Coleman.[18] In December 1997, Ronald Perelman and Al Dunlap met in order to discuss a possible deal between Coleman and Sunbeam Products. Coleman was stuck in a rut and Ronald Perelman wanted out. Coincidentally, Al Dunlap was sitting on top of a financially insolvent company he wanted out of.[7] It took until March 2 for the two to finally come to an agreement: Perelman sold his entire stake(82%) in Coleman to Al Dunlap in exchange for $1.5 billion in cash and $680 million of Sunbeam stock.[19] Perelman was convinced to do so by investment banker Morgan Stanley.[19] The deal was only completed on March 30. An ominous press release from March 19 said Sunbeam wasn't going to be able to meet sales expectations and triggered a sell-off. On April 3, another press release took Sunbeam's stock from bad to worse: It not only would not be meeting sales expectations for that quarter, but barely even the sales expectations of two years ago. Within weeks, the stock tumbled from $54 a share to $24 a share and it continued tumbling. Ronald Perelman bought control of Sunbeam in an effort to salvage the situation but it was for naught. The company was forced into bankruptcy within three years.[7] Perelman turned around and lashed out at Morgan-Stanley, filing a lawsuit against them claiming they had misled him by playing up the value of Sunbeam when they should have known otherwise. [20]

Major lawsuits

Morgan-Stanley

On February 17th, 2005, Ronald Perelman filed a lawsuit against Morgan Stanley. [21] Two facts were at issue: Did Morgan-Stanley know about the problems with Sunbeam and was Ronald Perelman misled? During the discovery phase, the judge became exasperated with she perceived as deliberate stone walling on the part of Morgan Stanley.[22] She ordered the jury to assume Morgan Stanley deliberately and knowingly defrauded its clients.[22] Hobbled, Morgan Stanley's legal team was left with no choice but to argue that Ronald Perelman was too savvy an investor to have fallen for their tricks.[20] After a five-week trial, the jury deliberated for two days before finding in favor of Ronald Perelman, awarding him $1.45 billion in damages.[23] The damages are particularily painful given that Perelman offered to settle the case for $20 million.[24] Morgan Stanley maintains that the court case was improperly decided, citing the judge's decision to use Florida law over New York law and her decision to order the jury to consider Morgan Stanley guilty before the trial began.[25] As of 2007, Morgan Stanley is still appealing the case.[26]

Personal life

Marriages

Perelman has been married four times. His first marriage was to heiress Faith Golding from 1965 to 1984, his second was to gossip columnist Claudia Cohen from 1985 to 1994, his third was to socialite Patricia Duff from 1994 to 1996 and his fourth was to actress Ellen Barkin from 2000 to 2006.

Faith Golding

Ronald Perelman met his first wife, Faith Golding, in 1965 while on a cruise to Israel.[4] As the heir to a fortune made in real estate and banking, Faith Golding was quite wealthy in her own right with a personal fortune of around $100 million at the time of their marriage.[4] The two of them adopted three children (Their names are Steven, Josh, and Hope) and Faith gave birth to a fourth child named Deborah. Their marriage lasted until 1984 when Faith discovered Perelman was having an affair with a local florist. Faith responded with great fury and staked a claim to a third of MacAndrews & Forbes due to a bank loan in her name, declared that Perelman had defrauded the owners of the First Sterling Corporation (i.e. her) by buying thousands of dollars of gifts for the florist with the company's money, and otherwise made a public spectacle of the divorce.[4] Ronald Perelman responded by hiring Roy Cohn and denying all of the allegations. The two settled privateyl out of court,[7] but it's estimated that Faith received compensation in excess of $8 million.[4]

Claudia Cohen

Ronald Perelman met his second wife, Claudia Cohen, in 1984 at Le Cirque.[4] The two dated for a year, frequently appearing on the gossip pages thanks to Claudia's position in the gossip industry and Perelman's immense wealth. They married a year after they first met in a private, Orthodox wedding. Perelman wasn't afraid to love or jewelry upon his new love, blowing her kisses in the hallways of his office and home. Their love was not to last. By August of 1993, Ron's love for Claudia was gone; He filed for divorce.[4] Claudia left the marriage with well over $100 million of Ronald Perelman's money.

Cigars

The phrase 'cigar-chomping' has a habit of appearing anywhere the name 'Ronald Perelman' is written.[27][28][29] Perelman first lit up when he was 26 years old. Trapped in a meeting that refused to end, a lawyer named Laddie Montague lit up a cigar. Perelman noticed how much Laddie enjoyed the cigar and asked to try one. Laddie obliged him.[30] From that day until 1999, he smoked between one and five cigars a day. [4] Perelman had Consolidated Cigar manufacture a custom 38-ring H. Upmann-style cigar just for him.[30][31] He quit smoking in 1999.[32]

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