Global Fastener News

Alleghany Now Growing in Fasteners

John Wolz

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 an 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.�