MacAndrews and Forbes

"RONALD PERELMAN brought more to the party than Peltz did. Perelman, for whom Drexel had been doing junk-bond financings since 1980, had boot-strapped himself into a series of acquisitions—keeping the profitable core, selling off the pieces, paying down the debt and leveraging up for the next acquisition. They were small by Drexel’s new standards—who had ever heard of Ronald Perelman in 1985?—but at least they had worked. With Drexel’s assistance, Perelman had just taken private his mini-conglomerate, MacAndrews and Forbes. And he was in the process of acquiring Pantry Pride, a supermarket chain discharged from Chapter 11 bankruptcy reorganization in 1981, which had a huge tax-loss carryforward of over $ 300 million that could be used to shelter income. It would be his vehicle, he hoped, for the kind of acquisition exponentially bigger than anything he had attempted before, something that would vault him forever out of the minor leagues. For the last month or so, Perelman, a crude Napoleonic type who was drawn to glamour and status, both in companies and on the social scene, had been eyeing Revlon. At the conference, Milken and Perelman had agreed that when the Pantry Pride deal closed, Milken would raise about $ 350 million for that company in a “blind pool”—for the purpose of an acquisition, but with no target identified."

"Then, in 1978, at age thirty-five, he decided to venture out. He borrowed $ 1.9 million to buy 34 percent of Cohen-Hatfield Industries, a jewelry distributor and retailer with $ 49 million in revenues that year. In 1980, Cohen-Hatfield spent about $ 45 million to buy MacAndrews and Forbes, a maker of chocolates and licorice extracts, and the Cohen-Hatfield name was dropped in favor of MacAndrews. In the fall of 1980, MacAndrews issued its first batch of junk bonds, a modest $ 33 million, underwritten by Drexel with Bear, Stearns. Over the next four and a half years, Perelman set out on a wholly leveraged, though relatively small-time, acquisition trail. He tried and failed to acquire the Richardson Company and the Milton Bradley toy and game company, but he made money in both transactions. He succeeded in buying, for a total of about $ 360 million, Technicolor, Inc., the film processor; Video Corporation of America, a major manufacturer of home videocassettes; the film-processing assets of Movie Labs; Consolidated Cigar; and a controlling interest in Pantry Pride. Roughly $ 140 million of this money came from Drexel junk-bond offerings, the rest from banks—and all built on that original (borrowed) $ 1.9 million, back in 1978."

"The other reason Perelman wanted to take MacAndrews and Forbes private, one associate said, was that he wanted “to do some things which might be criticized in a public company—have his own plane, have his artwork in his office. He wanted to have [MacAndrews and Forbes] as his nest egg—and then he wanted to acquire some other public company, for presenting his face to the financial world.”"

"“Even though Forbes magazine would have us believe otherwise, Mr. Perelman, who runs Pantry Pride today, seems to have had the ability of knowing what to do with his money. . . . In the last six to seven years, not only has he taken a few million dollars and purchased MacAndrews and Forbes, and then bought Wilbur Chocolates, and then took the company private, and then bought Consolidated Cigar, and then bought Technicolor, but [he] has subsequently invested money in Pantry Pride. . . . Pantry Pride was only selling at three and three quarters before Mr. Perelman took it over, and is now selling somewhere between eleven and twelve—in a matter of less than one year. Why? Because a management team has been brought to bear, which was willing to take the risk, who had the vision of value, and to find the backing of you in this room and other institutional investors around the country, willing to loan them money with the understanding that they had to commit to repay your interest and principal, and have the vision or foresight, which was the scarce resource, to identify those assets that are undervalued in the marketplace, the difference between a perception and the reality, and to use your money wisely. ."

"“Even though Forbes magazine would have us believe otherwise, Mr. Perelman, who runs Pantry Pride today, seems to have had the ability of knowing what to do with his money. . . . In the last six to seven years, not only has he taken a few million dollars and purchased MacAndrews and Forbes, and then bought Wilbur Chocolates, and then took the company private, and then bought Consolidated Cigar, and then bought Technicolor, but [he] has subsequently invested money in Pantry Pride. . . . Pantry Pride was only selling at three and three quarters before Mr. Perelman took it over, and is now selling somewhere between eleven and twelve—in a matter of less than one year. Why? Because a management team has been brought to bear, which was willing to take the risk, who had the vision of value, and to find the backing of you in this room and other institutional investors around the country, willing to loan them money with the understanding that they had to commit to repay your interest and principal, and have the vision or foresight, which was the scarce resource, to identify those assets that are undervalued in the marketplace, the difference between a perception and the reality, and to use your money wisely. . . ."

"Then, in 1978, at age thirty-five, he decided to venture out. He borrowed $1.9 million to buy 34 percent of Cohen-Hatfield Industries, a jewelry distributor and retailer with $49 million in revenues that year. In 1980, Cohen-Hatfield spent about $45 million to buy MacAndrews and Forbes, a maker of chocolates and licorice extracts, and the Cohen-Hatfield name was dropped in favor of MacAndrews. In the fall of 1980, MacAndrews issued its first batch of junk bonds, a modest $33 million, underwritten by Drexel with Bear, Stearns. Over the next four and a half years, Perelman set out on a wholly leveraged, though relatively small-time, acquisition trail. He tried and failed to acquire the Richardson Company and the Milton Bradley toy and game company, but he made money in both transactions. He succeeded in buying, for a total of about $360 million, Technicolor, Inc., the film processor; Video Corporation of America, a major manufacturer of home videocassettes; the film-processing assets of Movie Labs; Consolidated Cigar; and a controlling interest in Pantry Pride. Roughly $140 million of this money came from Drexel junk-bond offerings, the rest from banks—and all built on that original (borrowed) $1.9 million, back in 1978."

"RONALD PERELMAN brought more to the party than Peltz did. Perelman, for whom Drexel had been doing junk-bond financings since 1980, had boot-strapped himself into a series of acquisitions—keeping the profitable core, selling off the pieces, paying down the debt and leveraging up for the next acquisition. They were small by Drexel’s new standards—who had ever heard of Ronald Perelman in 1985?—but at least they had worked. With Drexel’s assistance, Perelman had just taken private his mini-conglomerate, MacAndrews and Forbes. And he was in the process of acquiring Pantry Pride, a supermarket chain discharged from Chapter 11 bankruptcy reorganization in 1981, which had a huge tax-loss carryforward of over $300 million that could be used to shelter income. It would be his vehicle, he hoped, for the kind of acquisition exponentially bigger than anything he had attempted before, something that would vault him forever out of the minor leagues. For the last month or so, Perelman, a crude Napoleonic type who was drawn to glamour and status, both in companies and on the social scene, had been eyeing Revlon. At the conference, Milken and Perelman had agreed that when the Pantry Pride deal closed, Milken would raise about $350 million for that company in a “blind pool”—for the purpose of an acquisition, but with no target identified."

"The other reason Perelman wanted to take MacAndrews and Forbes private, one associate said, was that he wanted “to do some things which might be criticized in a public company—have his own plane, have his artwork in his office. He wanted to have [MacAndrews and Forbes] as his nest egg—and then he wanted to acquire some other public company, for presenting his face to the financial world.”"