Global Fastener News

2000 FIN – Alleghany Now Growing in Fasteners

July 22
00:00 2013

April 4, 2000 FIN – The fastener industry knew Lee Bookman and the fastener importing and distributing business he headed for decades, Heads & Threads.
The parent company was hardly a household name in the fastener industry until Alleghany Corporation acquired Gardenbolt International in 1998.
Then as 2000 began, the merged importers, now known as Heads & Threads International or HTI, announced the acquisition of yet another importer/distributor, Reynolds Fasteners. The Reynolds transaction officially closed April 3. Just two years ago the lone Heads & Threads was only 5% of Alleghany’s business. This year fasteners may account for as much as 10% of sales, depending on acquisitions and the sale of portions of Alleghany’s insurance businesses, vice president and controller Peter Sismondo projected.
In 1999 Alleghany’s revenue totaled $1,376,200,000, and net earnings were $100,100,000.
In past years Alleghany’s financial reports broke out the underwriters group, asset management and minerals, but not fasteners. With the latest acquisition, fasteners will outgrow the “other” category and will be reported as a separate segment.
The fastener industry is beginning to learn the name – Alleghany Corporation – and its symbol “Y” on the New York Stock Exchange.
And Alleghany corporate leaders have taken a crash course in fasteners, because bolts, nuts and screws now command their attention.
Steve Schonholtz, CEO of the old Gardenbolt and, upon the retirement of Bookman earlier this year, CEO of the combined importing companies, gave the Alleghany executives a tour of the industry by walking the floor of the National Industrial Fastener Show in Columbus, OH, last year.
Alleghany inherited Northbrook, IL-based Heads & Threads with the 1974 acquisition of fabricated steel product manufacturer MSL Industries. That business included everything from motors for the then-famous IBM Selectric typewriters to parts for machine guns used in Vietnam and barge-size I-beams for bridges.
“It was a quite profitable business,” senior vice president David Cuming recalled during a FIN interview in his office on the 32nd floor of the Seagram Building on Manhattan’s Park Avenue. “We liked the steel business as a possible investment area.”
Though most of Alleghany’s steel business was eventually spun off, somehow Heads & Threads stayed with Alleghany over the decades. Treasurer Sismondo noted that Alleghany didn’t need to pay much attention to Heads & Threads or fasteners, because “Lee Bookman ran the company so well. He sent up cash and didn’t require attention. Lee knew the business. He was the first one in with the numbers and always had good numbers.”
Bookman had joined Heads & Threads in 1959 and became president in 1967 before the importer was acquired by Alleghany.
Acquiring Gardenbolt
Vice president Jeff Kirby told FIN that Alleghany regularly receives calls about businesses available for acquisition, but “Lee typically had a reason” for passing on the fastener companies that were offered for sale.
“During the winter of 1998 Lee called us,” Kirby recalled. “He had a lead on a company and thought we should pursue it.”
Alleghany executives knew that if Bookman was interested, the deal must be worth looking into.
Cuming added that the Asian financial crisis at the time “had squeezed a lot of the margins, and it was a good time to pick up an importer.” Alleghany also wanted a successor to Bookman, Cuming remarked. “Steve was a very important part of [buying Gardenbolt],” Kirby said.
With the combined fastener companies Alleghany is relying on Schonholtz, Mike Wrenn – Bookman’s #2 at Heads & Threads – and Reynolds CEO Don Haggerty to lead the newly expanded portion of the corporation. Cuming acknowledged that fasteners are a different business for Alleghany. The corporation is used to the money management, mining and insurance fields.
He likes that mining and fasteners are “something that people can understand. Investors have a pretty good idea of what they do as opposed to financial services. No one is quite sure what a reinsurance contract is.” Sismondo added that mining and fasteners give the parent corporation “a hedge against the financial risks inherent with the other businesses we own.”

Alleghany’s Fastener Plans
Prior to the Gardenbolt deal, independent analysts had recommended that Alleghany grow its fastener business.
“We have decided to make fasteners more significant in the context of Alleghany,” Cuming said.
“We will probably continue to look for opportunities.”
More Alleghany activity in the fastener business may be just months away.
Sismondo observed that putting together the Heads & Threads and Gardenbolt operations was “a daunting task, because they had different operating styles. Our current style and Reynolds are more similar. Within six to nine months we’ll be ready.”
Cuming added that Alleghany is prepared to act. “We have the capital, and our people know the business. It makes sense for us.”
Fastener importing and distributing opportunities are more likely than manufacturing, because “we haven’t done any manufacturing,” Cuming explained.
Future acquisitions need not be as large or be such well-known players as Gardenbolt and Reynolds. “We may make relatively small acquisitions to fill in the gaps and broaden our range of products,” Cuming predicted.
“Sockets, metrics, stainless and construction fasteners are closer to our radar screen,” Kirby said. “Tooling and manufacturing are off the radar screen.”
Cuming pointed out that with both the former Gardenbolt and Reynolds operations once headquartered in New Jersey and Schonholtz based there, corporate activities will move toward New Jersey.
Atlanta, Chicago, New Jersey, Los Angeles and Houston/Dallas, are the key supply centers for HTI facilities in 19 states. But Alleghany’s corporate executives acknowledge that the real future is up to Schonholtz.
“Steve definitely has ideas as to the direction we will take,” Cuming remarked.
Schonholtz responded, “Alleghany has offered a lot of encouragement to grow our market segment. By investing in a state-of-the-art computer system and giving us the resources to acquire Reynolds, Alleghany continues to show their commitment to our expansion plans.”
As to the Reynolds acquisition, Schonholtz replied, “By merging three of the larger importers together we have forged a major nationwide network of fastener inventories that our customers can use to fully service their customers.” Schonholtz said each company has its specific strengths, Heads has the broadest product line and the most facilities, Reynolds a sophisticated shipping logistics plan and aggressive pricing policy and Gardenbolt a direct mill division specializing in blueprint items and inventory management systems.
“Our major goal is to mold the strengths of all three companies into one entity that fastener distributors can rely on for all their procurement needs,” Schonholtz said. “Further acquisitions may be coming, but right now strict attention to this consolidation and responding to our marketplace will take priority.”©2000/2012 Fastener Industry News.
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Alleghany Began as Railroad Company
April 4, 2000 FIN – Alleghany Corporation traces its roots back to the Van Sweringen brothers, Otis Paxton and Mantis James, who formed the company a few months before the stock market crash of 1929.
“The ‘Vans’ were a product of the heady years of the Roaring Twenties,” according to a history of Alleghany published in its 1992 annual report. “They had lived through a period of wild speculation in the stock market sparked by the rosy boom-time vision that all you had to do to become rich was mortgage your home, hock everything else of value and put your money in a market that could go nowhere but up.” Starting in 1916 by buying the Nickel Plate Railroad, the Vans built a $3 billion railroad network with 23,000 miles of track – one-fifth of the nation’s total.
By 1929 they had acquired Chesapeake & Ohio, the Erie and the Pere Marquette, and Alleghany was formed as the holding company.
Their reliance on debt nearly destroyed the company in the Great Depression. The brothers defaulted on a loan in 1935 and both died within a year.
They had gone from being worth $100 million to leaving a $500,000 insurance policy and their suburban Cleveland home.
Midamerica Corporation had picked up the company in an auction and sold it to a syndicate headed by Robert Young, Allan Kirby and Frank Kolbe.
The new owners battled for years in and out of court for control and to protect the corporation from its Missouri Pacific holding bankruptcy. MoPac issues weren’t resolved until 1973, when Alleghany won $42.4 million plus stock in a lawsuit against controlling stockholder Mississippi River Corporation.
Alleghany was immersed in court and regulatory battles over New York Central, B&O, C&O and the Pennsylvania Railroad, including a six-year process of winning ICC approval for the PennCentral merger in 1968. Alleghany began diversifying in 1949 by acquiring stock in Investors Diversified Services, a Minneapolis-based financial services company.
The IDS Tower that changed the Minneapolis skyline was built under Alleghany’s ownership. Fred Kirby II succeeded his father as CEO in 1967, and the current chairman, John Burns Jr., joined Alleghany as vice president in 1968. Kirby emphasized decentralization of management, allowing Alleghany businesses quasi-autonomous operation. The parent company set goals, provided incentives and monitored performance.
Alleghany moved into the steel business with the purchase of MSL Industries in 1974, changing the corporation from an investment company to an operating company.
In 1983 IDS was sold to American Express for more than $780 million, and Alleghany went shopping with the proceeds.
Acquisitions in the late ‘80s included Chicago Title & Trust, Safeco Title, Ticor Title, Sacramento Savings Bank and in 1991 world mineral producer Celite Corporation.
In 1987 the MSL Industries businesses, with the exception the fastener importer/distributor Heads & Threads, were spun off to stockholders as Cyclops Industries Inc.
Burns succeeded Kirby as president and CEO in 1992.
Today Alleghany is an operating company with no railroad investments. ©2000/2012 Fastener Industry News.
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