The growth of conglomerate

The growth of the LTV Corporation is one of the classic stories of the growth of conglomerates during the third merger wave. The company was led by James Josepth Ling -- the Ling of Ling-Temco-Vought. The story of how he parlayed a $2,000 investment and a small electronics business into the 14th-largest industrial company in the United States is a fascinating one. LTV was a sprawling industrial corporation that at its peak included such major enterprises as Jones & Laughlin Steel, the nations's sixth-largest steel company; Wilson & Co, a mojor meat packing and sporting goods company; Braniff Airways, an airline that serviced many domestic and international routes; Tempco and Vought Aircraft, both suppliers of aircraft for the military; and several other companies.
The company originated in a small Texas electrical contrating business that Jimmy Ling grew, through a pattern of diverse acquisitions, into one of the largest U.S. corporations. The original corporate entity, the Ling Electric Company, was started in 1947 with a modest investment of $2000, which was used to buy war surplus electrical equipment and a used truck. By 1956 Ling Electronics had enjoyed steady growth adn embarked on one of its first acquistions by buying L.M. Electronics. Various other electronic and defense contractors were then acquired, including the American Microwave Corporation, the United Electronics Company, and the Calidyne Company. Acquisitions like these, companies that lacked the requisite capital to expand, were financed by Ling through a combination of debt and stock in his company, which traded on the over-the-counter market.
By 1958 this master deal maker sold an offering of convertible debentures in a private placement that was arranged by the Wall Street investment bank of White Weld & Company. This type of securities offering was particularly popular with the deal makers of the third wave because it did not have an immediate adverse impact on earnings per share, thus leaving the company in a good position to play the "P/E game." With its stock price trading in the $40s, LIng started the process of buying targets that were much bigger than the acquiring company by the 1958 stock-for-stock acquisition of Altec Compaies, Inc., a manufacturer of sound systems.
After some other small acquisitions, Ling initiated his largest acquisition when he merged his company with the Texas Engineering and Manufacturing Company, Tempco. This deal enabled LIng to accomplish a long-term goal when the merged company, Ling-Tempco Electronics became part of the Fortune 500. Shortly thereafter, Ling prebailed in a hostile takeover of the Vought Aircraft Company to form Ling-Tempco-Vought.
LTV went through a period of lackluster financial performance, which forced Ling to restructure the company by selling off poorly performing divisions. In 1967 Ling succefully completed a tender offer for Wilson & Company, a firm twice the size of LTV. This deal vaulted LTV to number 38 on the Fortune 500 list. Wilson was composed of three subsidiaries, Wilson & Company, the meat packing business; Wilson Sporting Goods; and the Wilson Pharmaceutical and Chemical Corporation. Traders somtimes referred to these divisions as "meatball, golf ball, and goof ball."
The next step Ling took in assembling this massive conglomerate was to buy the Great America Corporation, which was a holding company with investments in a variety of businesses such as Briniff Airlines adn National Car Rental as well as banks and insurance companeis. Although fer beneficial commonalities appeared to be associated with this acquisition, Ling was able to exploit several, such as the insurance companies writing insurance for a variety of LTV units and employees.
Following an unsuccessful takeover of the Youngstown Sheet and Tube Company, Ling set his sights on the fourth-largest steel producer in the United States, Jones & Lauhhlin Steel. LTB bought Jones & Laughlin in an $85 tender offer for a company with a preannouncement price of $50. This $425 million bid was the largest cash tehnder offer as of that date and represented a 70% premium for a company in a low growth industry! Unfortunately, the takeover of Jones & Laughlin drew the ire of Assistant Attorney General McLaren, who saw it as another anticompetitive conglomerate acquisition. The Justice Department filed an antitrust lawsuit, which was bad news for any defendant because the government won a very high percentage of such cases. The market seemed to concur with this legal assessment, since the stock price declined following the announcement. Due to the lawsuit, LTV was prevented from playing an active role in the management of JOnes & Laughlin and taking steps to trun around the poorly performing steel company that had just announced its worst earnings performance in a decade. With the addition of Jones & Laughlin, LTV now had two major components of its empire, Braniff Airlines being the other one, that were reporting sizable losses. A settlement of the lawsuit was reached in which LTV agreed to sell off Braniff and the Okonite Company, a cable adn wire manufacturer.
Although LTV was able to achieve a favorable settlement, its stock suffered partly as a result of the lawsuit, the poor performance of its subsidiaries as well as the overall decline in the market. These factors gave rise to pressures from dissident shareholders and boldholders to remove Ling from control of LTV. Ling was not able to survive these pressures adn was demoted from his position as chief executive and eventually left LTV. The story of Jimmy Ling and the huge conglomerate that he built is one of a man who was ahead of his time. He was probably the most renowned of the great conglomerate builders of the third merger wave. Whereas the 1980s featured such raiders as Carl Icahn and Boone Pickens, Ling was joined in the third wave by other "conglomerators" as Lawrence Tisch of Loews, Charles Bluhdorn of Gulf & Western, and Ben Heineman of Northwest Industries. Long before the 1980s, Ling had mastered the art of the leveraged buyout and hostile takeover. Unlike many of the raiders of the 1980s, however, Ling was opposed to trying to turn a quick profit on acquisitions by selling off assets. He bough companies with a more long term strategy in mind, which, nonetheless, many criticized. Although it has undergone many changes since the third merger wave, including a bankruptcy, LTV still operates today.