Lehman Brothers Collection - Contemporary Business Archives

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Twentieth-Century Business Archives

Gulf & Western Industries, Inc. - Lehman Brothers Collection

Gulf & Western Industries, Inc.

List of Deals

Charles George Bluhdorn, the founder of Gulf & Western, Inc., got his start with a coffee import business, the Fortuna Coffee Company. The coffee industry fluctuated wildly, and Bluhdorn was hoping to make an acquisition in a more stable industry. He turned to the auto parts business and acquired Michigan Plating & Stamping Company, which had the added benefit of being a publicly traded company whose stock Bluhdorn could use to buy other companies. In 1956 Bluhdorn secured a controlling interest in the company, and a year later he merged Michigan Plating with Beard & Stone Electric Company. In 1958 he renamed the company Gulf & Western Corporation.

As it grew, Gulf & Western acquired a number of private auto-parts warehouses and distributors. In 1965, as the company's annual sales approached $200 million, Bluhdorn decided that the time had come to diversify. That year, Gulf & Western acquired a large amount of the stock of New Jersey Zinc, a large mining and chemical company. By early 1966 the conglomerate Gulf & Western was born. By this time, the company's total sales rose from about $180 million to nearly $300 million, and the company's earnings almost tripled, amounting to $17 million. Bluhdorn then began to look for companies in any industry whose undervalued assets he could use to borrow against heavily and purchase more companies.

In 1966 the company acquired Paramount Pictures Corporation, which was suffering heavy losses at the time. Gulf & Western paid $125 million for Paramount and, in return, Gulf & Western's sales were improved to $450 million, ranking the company in the top 110 U.S. manufacturing companies. During this time, the company's auto parts business was also growing. By 1966 it was operating thirty-three auto parts warehouses and 150 auto parts distribution outlets in twenty-eight states.

Gulf & Western acquired the South Puerto Rico Sugar Company in 1967. In the next year alone, the company purchased twenty-three companies, including Consolidated Cigar, E.W. Bliss, Universal American, Brown Company, and Associates Investment Company. Associates Investment became the largest single contributor to Gulf & Western's earnings. By 1968 Gulf & Western's sales surpassed $1 billion, producing a net income of $69.8 million. The company had then acquired 130 companies since its inception.

The company even profited from most of its unsuccessful takeover attempts. In 1968 the company purchased 8 percent of Pan Am stock, hoping to exploit the airline's new 747 airplane and its extensive routes and to develop resort complexes around the world. Pan Am was not interested in such a plan. Soon thereafter, a House Judiciary Subcommittee began to investigate the purchase, causing Gulf & Western to divest itself of the stock. The company made a significant profit from this sale. That same year, Gulf & Western attempted to buy Armour Company. After being discouraged by the Justice Department and watching Gulf & Western's stock plummet thirteen points in three weeks, Bluhdorn dropped his bid on Armour and sold the stock at a $16.5 million profit. By this time, Gulf & Western had built up a $224 million stock portfolio.

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