Burt Sugarman: From Showbiz Into Something More Concrete
Over the years, many captains of American industry have carted their capital to Hollywood in hopes of making it as moguls. Denver oilman Marvin Davis--who purchased, then sold, 20th Century Fox--is a recent example.
But Burt Sugarman, the veteran TV and film producer best known for the late-night concert series “Midnight Special” that ran for 10 years on NBC, has gone the other direction.
In the last few years, Sugarman has invested millions of his Hollywood-earned dollars in some decidedly unglamorous heartland industries--everything from cement and steel to wood paneling and vacuum cleaner bags.
And to the amazement of nearly everyone--including himself--the one-time collector of exotic cars and escort of beautiful actresses has emerged as, in the words of one financial analyst, “a significant industrialist.”
Sugarman, 47, is now chairman of Giant Group, a Beverly Hills-based holding company that owns 100% of two cement manufacturing companies with combined assets of $150 million and an investment company called KCC Delaware that currently has $90 million in cash and holds stocks worth another $81 million.
And, as if to symbolize his arrival in the industrial big leagues, Sugarman has now been accused of seeking “greenmail” in Giant’s recent attempt to take over TRE Corp., a Los Angeles manufacturer of aerospace materials and home products.
Giant recently acquired on the open market 1.15 million shares of TRE common stock--about 17%--and is engaged in a proxy battle with management for representation on TRE’s board.
In an effort to fight Giant’s attempt, TRE announced last week that it had found a “white knight” merger partner in Alcoa, which has made an offer of $46.38 per share for TRE’s 6.9 million common shares.
It has also accused Sugarman and Giant of speculating in TRE stock in an attempt to run up the price and obtain greenmail--the premium companies have sometimes been willing to pay to buy out unwanted corporate suitors. Sugarman denies it.
Sugarman denies seeking “greenmail.” He claims Giant is merely fighting for representation on TRE’s board, which management has flatly refused. “We want six of the nine board seats,” he said. “We have an investment worth $49 million that we have to protect.”
Sugarman will not comment on Giant’s plans in the face of the Alcoa offer. However, he noted that since Giant had bought into TRE at an average price of about $33 a share, if the Alcoa deal goes through, “the ‘downside’ for us would be a profit of $15 million.”
Two Current Movies
Almost as a sidelight to all this, Sugarman the Hollywood film maker is the producer of two movies currently in the nation’s theaters--”Extremities,” starring Farrah Fawcett, and “Children of a Lesser God,” starring last year’s Oscar winner, William Hurt--with another to be released at Christmas, “Crimes of the Heart,” starring Jessica Lange, Sissy Spacek and Diane Keaton.
All three films are based on award-winning plays whose movie rights were acquired by Sugarman before any awards were won.
“That’s the whole idea--to spot a property you believe has that kind of future and which will then become more valuable for you,” Sugarman said in a recent interview at his Beverly Hills office. “It’s just like getting involved in a company where you see growth a year or two down the line that someone else may not see.”
He saw something no one else saw in late 1982 when, in the midst of a severe recession in the cement industry, he paid $3 million to acquire 28% of the voting stock of Giant Portland & Masonry Cement, a Columbia, S.C., company that by all accounts was close to bankruptcy. As the company’s largest shareholder, he was named its chairman soon thereafter.
“It was a joke in the industry that this Hollywood guy would buy Giant, which had experienced five straight years of losses and was doomed to failure,” said Roblee Martin, chairman of Giant Cement Co. and also of Keystone Cement Co., a Bath, Pa., firm that Giant acquired in 1985.
“He knew nothing about the cement industry, which is why he bought into it--if he knew, he wouldn’t have done it. He was a laughingstock.”
Not Laughing Now
No one is laughing these days, however. After weathering an almost complete management change and a three-month strike at Giant Cement in 1984, Giant Group is expected to earn more than $10 million from its cement operations in 1986, on sales of more than $80 million.
“I will say without any reservation and modesty that we’re the two strongest companies in the industry, and it was all brought about by Burt--he literally saved the company,” said Martin, whose first name is a shortened version of Robert E Lee.
“He jumped in with both feet, pumped money into it and revitalized the company. He went into the plants, got into the numbers and even made sales calls. He’s just a brilliant man.”
Stephen Weinress, a partner in the Los Angeles investment banking firm of L. H. Friend & Co., agrees. “Burt is one of the most impressive men I’ve met in the business world,” he said.
“He has an incredibly retentive mind,” Weinress said. “I remember the first time I went into his office and asked him about Giant. His desk was immaculately clean. I had all the financial information in my lap and he gave me every statistic almost verbatim from the 10-K, with nothing in front of him.
“He’s personable, bright, driven and extremely fastidious,” Weinress said, adding with a chuckle: “When Burt goes skiing, if he falls down, the snow doesn’t stick to his clothes.”
Sugarman’s personal fastidiousness obviously carries over to the running of Giant. “Our cement plants are the cleanest in the industry; they’re spotless, with mowed grass and flowers,” he said with unconcealed pride. “Our trucks are bright red, white and blue with ‘Buy American’ painted on the side.”
A Great Business
Normally soft-spoken and undemonstrative, Sugarman becomes passionate when discussing cement. “It’s a great business,” he said. “It’s been around for more than 1,000 years and it’s one product that will never be replaced by a computer chip.”
He’s particularly proud of the fact that Giant is considered a pioneer in this country in the field of “resource recovery,” or the burning of solid waste.
“Cement plants burn an enormous amount of fuel; it accounts for about 30% of your cost of operation,” he explained. “So what we’re doing at our plants is burning other people’s waste products. Instead of paying for fuel to make our product, we are getting paid to burn fuel, which makes us the lowest-cost producers in the business.
“You see, a cement kiln is one big incinerator. We go to 2,700 degrees Fahrenheit, whereas a steel mill only goes to 2,250. It’s so hot it can burn anything. We’ve chosen at this time not to burn toxins like PCBs, although we have that capability.”
“Do you know how much waste is out there--waste waters, waste solvents?” he asked, slipping into what sounded like a polished sales pitch.
“Say you are a company that produces waste. You have to take the stuff, stick it in a barrel and landfill it. And then you are responsible for it from cradle to the grave. Fifteen years down the line, if that barrel leaks and it goes into the water system--as we are finding it all does--you are responsible.”
“However, for a little bit more money you can pay us and give us your waste, we incinerate it and it goes out into the atmosphere as pure steam. And you have no more responsibility.
“I saw the waste-burning business coming,” he said. “Because nobody wants a landfill in their back yard. It’s possible that in the not-too-distant future cement will be just a byproduct of waste-burning.”
Changes in Broadcasting
Right now Sugarman sees major changes coming in the broadcast industry. Which is why, he says, Giant recently agreed to pay $26 million for 2 million outstanding shares--23%--of Barris Industries, a Beverly Hills TV production-syndication firm headed by game-show producer Chuck Barris.
Under the proposed agreement--which is expected to go through without a hitch, since Barris and Sugarman are close friends--Sugarman will take over as chairman and Barris will return to creating and producing shows for the company.
Barris is best-known for such shows as “The Dating Game,” “The Newlywed Game” and “The Gong Show.” Some have called it schlock fare, but Sugarman calls it “cost-effective programming” that’s perfectly positioned for the new economic realities of prime-time TV.
“The business is in upheaval at the moment,” he said. “The men who are now running the networks--Laurence Tisch (CBS), Robert Wright (NBC) and Tom Murphy (ABC-Cap Cities)--are solid businessmen. They are owners rather than managers, and owners think differently, they’re more bottom line oriented. These guys don’t care if they are ranked 1, 2 or 3 so much as they care about making more money for the stockholders and themselves.”
“If you as a producer go to them with a show that will cost $1.3 million an episode and you say you think it can get a 28 share, they’re going to say, ‘That’s just not cost effective.’
“Barris will make shows for $250,000 instead of $1.3 million,” Sugarman said. “One thing Chuck knows is how to use a studio. He does five to six shows a day instead of one over two weeks.
The WalMart of TV
“I think we can be the WalMart of TV,” he said, referring to the big discount retailing chain. “You know, there’s nothing wrong with WalMart sport coats. They may not be Ralph Lauren, but you get tremendous quality for the price.”
For all his TV and movie ventures, Sugarman claims that he spends only about 2% to 3% of his time on show business matters these days. “I didn’t plan it that way, it sort of evolved into it as Giant grew. Most of my time is spent with the presidents, heads of sales and plant managers of our cement companies,” he said.
Last week, for example, he flew down to South Carolina to give a speech to the employees of Giant’s Harleyville plant--270 people whose jobs ultimately were saved by Sugarman’s 1982 buyout, according to Giant Cement Co. Chairman Martin. Not surprisingly, the speech drew a sustained standing ovation.
“What would you expect?” drawled Martin. “This is redneck country down here and we’re out here in the boondocks makin’ cement in a four-hole swamp. So when this millionaire Hollywood movie producer flies into town in his private jet, don’t you think we’re appropriately awed?”
