Chairman Resigns After Selling Stake in Steel Operation
Van Nuys businessman Lloyd C. Lubensky, who paid a mere $100,000 for 34% of struggling Wheeling-Pittsburgh Steel Corp. in December, 1986, said Friday he sold his stake for $14 million to the investment firm Goldman, Sachs & Co.
Lubensky, 66, was chairman of Wheeling-Pittsburgh, but officials at the company’s Wheeling, W.Va., headquarters said that he was resigning immediately.
Lubensky became chairman of the eighth-largest U.S. steelmaker shortly after buying his stake from industrialist Allen E. Paulson. Under Lubensky’s two-year reign, Wheeling-Pittsburgh has continued reorganizing under federal bankruptcy laws; the company filed for Chapter 11 bankruptcy law protection on April 16, 1985.
In a filing with the Securities and Exchange Commission, Lubensky said he sold his 1.75 million Wheeling-Pittsburgh common shares to Goldman Sachs for $8 a share. A Goldman Sachs spokesman said the stock was bought for investment purposes, but he declined to elaborate.
Investors responded warmly to the purchase by Goldman Sachs, one of Wall Street’s top investment firms. Wheeling-Pittsburgh’s common stock rose $1.625 a share, to $12.375, in New York Stock Exchange composite trading Friday.
Both Lubensky and Wheeling-Pittsburgh President William Scharffenberger were said to be out of their offices Friday and unavailable to respond to questions. Wheeling-Pittsburgh spokesman Raymond A. Johnson, when asked about Lubensky’s contributions to the steelmaker, also declined comment.
Some analysts said Lubensky earned the huge profit on his investment.
“Somebody that has the guts to walk into a company that’s ready to go belly up deserves everything he earned,” said Andrew Brichant, who follows Wheeling-Pittsburgh for the brokerage firm Ladenburg, Thalmann & Co.
Jack Kneafsey, a bankruptcy specialist for Prudential-Bache Securities, noted that when Lubensky bought the stock, “for a while it looked like his $100,000 was going to be worth zip. The industry at that time was really in the doldrums.”
Lost $783.5 Million
Wheeling-Pittsburgh has since rebounded in tandem with the U.S. steel industry overall, and “how much of that is due to him is kind of hard to say,” Kneafsey said. “I think we have to give him part of the benefit of bolstering” the company, especially because Lubensky had to work “within the framework of the bankruptcy,” he added.
From 1982 through 1986, Wheeling-Pittsburgh lost a total of $783.5 million. But it’s been profitable in recent quarters, and on Tuesday the steelmaker said it earned $258.5 million last year on sales of $1.1 billion.
Lubensky might have decided “it was best for him to cash out” after seeing a preliminary reorganization plan that Wheeling-Pittsburgh filed with the U.S. bankruptcy court in Pittsburgh early this month, Kneafsey said. Under the plan, the steelmaker would issue 20 million new common shares, leaving current common stockholders with 7.5% of the reorganized company and diluting Lubenksy’s stake to just 2.5%.
Lubensky, an intensely private man who has been a Wheeling-Pittsburgh director since October, 1985, bought the stock for less than 6 cents a share on Dec. 31, 1986, from Paulson, the head of Gulfstream Aerospace Corp. in Savannah, Ga.
Paulson, who netted an estimated $450 million by selling Gulfstream in 1985 to Chrysler Corp., had paid $50 million to accumulate 34% of Wheeling-Pittsburgh during 1983 and 1984, and became the steelmaker’s chairman.
But after Paulson sold the shares to Lubensky for a near total loss, there was published speculation that the sale was one of convenience because Paulson was an old friend of Lubensky’s and eager to get certain tax advantages of the loss before the year ended. Both men denied that was the case, although Paulson acknowledged that he sold the stock for tax benefits.
Lubensky’s main office is at the Van Nuys headquarters of American Jet Industries, which buys and sells surplus airplane parts. Paulson started the company in the late 1950s and sold it to Lubensky, a bomber pilot during World War II, for an undisclosed price in 1982. Lubensky sold American Jet to Ryder System in August, 1986, but remained president.