Lubensky Paid Small Price in Wheeling Deal : Got 34.2% Stake in Ailing Steel Firm for $100,000, Filing With SEC Discloses
Competitors say Lloyd C. Lubensky never pays retail, but even they may be astonished by the price he got Dec. 31 on a 34.2% stake in ailing Wheeling-Pittsburgh Steel.
Lubensky disclosed Monday that he paid $100,000 cash, according to records filed with the Securities and Exchange Commission. He bought the shares from a man who paid $50 million to accumulate them in 1983 and 1984.
For his money, the 64-year-old Van Nuys executive gained a controlling interest in the nation’s eighth-largest steelmaker for less than six cents a share. The stock closed Monday at $8.375, up 37.5 cents, on the New York Stock Exchange.
The seller, his old friend Allen E. Paulson, couldn’t be reached for comment Monday on why he sold so cheaply. He said last week that he sold on Dec. 31 in order to get the tax benefits of his losses on the stock, and that there were too many shares to sell on the open market.
Lubensky, meanwhile, denied published speculation that the sale was merely one of convenience to enable Paulson to get the tax benefit before the year ended.
“No way,” Lubensky insisted. “He has absolutely no position in that stock whatsoever.”
Lubensky added that the deal may not be such a bargain: Wheeling-Pittsburgh filed in April, 1985, for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code; the federal government has about $900 million in claims against it; and the U.S. steel industry is so burdened by overcapacity, high costs, and foreign competition that the company’s long-term survival is questionable.
“They’ve got serious difficulties,” agreed Charles Bradford, a steel industry analyst with Merrill Lynch Capital Markets. “I can’t see where there’s anything left for the shareholders after the bankruptcy proceeding.”
But Lubensky, the intensely private president of American Jet Industries, also acknowledges with a chuckle that he bought an undervalued asset. And he asserts that the Pittsburgh-based steelmaker will turn around.
On Monday, Wheeling-Pittsburgh said its vice chairman and chief executive, George A. Ferris, will be acting chairman until the next board meeting in February, and that John P. Innes II, managing director of Sabre Insurance Co., will fill the board vacancy created by Paulson’s resignation.
Lubensky said he owns enough stock to make himself chairman but doesn’t want the job, at least “until such time as I know a lot more about the business.”
He added that he is formulating plans for the company’s future and expects to make some changes in its board, and possibly its management, soon. He also said he will be active in the company’s day-to-day affairs.
Friends for Years
Lubensky became involved with Wheeling-Pittsburgh in October, 1985, when Paulson, its chairman at the time, made him a director. The two men, both 64, have been friends and tennis adversaries for years.
They have also done business. Paulson founded American Jet, which buys and sells surplus airplane parts, in the late 1950s and sold it to Lubensky in 1982 for an undisclosed sum. Lubensky in turn sold it to Ryder System in August, also for an undisclosed sum, but remains president. Competitors say Lubensky, who is nicknamed Lou, has done well with the business.
“Lou would never buy anything at retail,” said David Seely, president of 57th Aerospace Group Inc., a surplus plane parts company in North Hollywood. “Lou is very good at it.”
Paulson, meanwhile, founded Gulfstream, a successful maker of private jets that was bought by Chrysler two years ago. Investing in Wheeling-Pittsburgh was a major miscalculation for him, but he apparently remains a wealthy man. Forbes last fall estimated his net worth at more than $300 million.
