Texas Investor Harold Simmons Builds His Wealth With Goal in Mind

Harold Clark Simmons is a busy billionaire, but he needs to reach his goal of leaving more money for medical research than did Howard Hughes.

“Money brings a lot of responsibility as to what you’re going to do with it, and I’ve given quite a bit of thought to that,” Simmons said in an interview during which he gave a rare insight into the thoughts and actions of one of the nation’s wealthiest investors.

“Basically, my decisions have been largely to funnel most of the funds that I have available for discretionary giving to medical research,” said Simmons, who has arthritis, a painful inflammation of the joints.

Last year, he gave $41 million to the University of Texas Southwestern Medical Center in Dallas for cancer and arthritis research and his goal is to at least match the Howard Hughes Medical Institute.

Hughes, the reclusive industrialist who died in 1976, had created the institute 23 years earlier and given it sole ownership of Hughes Aircraft Co.

Sold to Eckerd

In the mid-1980s, the institute sold Hughes Aircraft to General Motors Corp. for $5.2 billion. Today, the institute’s endowment is about $6.5 billion, making it the nation’s largest private philanthropic foundation.

“I won’t cry if I don’t make it, or I won’t boast if I get over that,” Simmons said. “I think that’s a nice round figure. It’s realistic.”

Simmons, 58, is well on his way, increasing his wealth at an average of almost $14 million a month in the 12 years since he cashed the stock that he received from selling his Texas drugstore chain to Jack Eckerd Corp.

He began the chain with $5,000 in cash and a $95,000 loan to buy a drugstore near Southern Methodist University. Through a series of acquisitions, he built up to 100 stores before selling to Eckerd for stock worth an estimated $50 million.

Restrictions on that stock, however, prevented him from selling immediately. The stock had declined to about $12 million before he could unload it.

With that $12 million, the son of two rural Texas schoolteachers has built a fortune bumping $2 billion through a combination of takeovers and stock plays involving some of American’s biggest companies.

Lately, Simmons has become a more public figure, granting interviews and disputing his past image among some of his targets as a bad guy.

“I don’t think I have a black-hat image,” he said. “I think that I’m certainly feared and dreaded, and maybe not highly regarded by management of public companies that don’t own very much stock in the company.

“I’m not trying to change an image, I’m just trying to make sure that the facts match the image. The facts are basically that I’m a builder. I have not dissembled any company nor split up any companies, nor do I ever buy any companies with that intent.”

While other high-stakes investors are either dormant or prowling overseas, Simmons has at least two major plays under way: He continues to buy stock in Calabasas-based Lockheed Corp., now holding more than 10%, and is awaiting Georgia Gulf Corp. management’s response to his almost 10% stake in the company.

“I think the thing that I’ve done well, the thing that I’ve been able to make money on, is simply evaluating the public information . . . of public companies,” Simmons said.

“And based on that information, I’ve made some decisions and taken some actions that have resulted in most of my wealth, so I think that’s what I have a talent for. It’s a fairly narrow talent, and you’re not always right.”

Simmons claims to be lazy, arriving at the office late and leaving early. He also likes to play tennis, ride dirt bikes and fly in his private jet, although in person he displays none of that energy.

Instead, he barely moved during an interview at his North Dallas office, discussing in subdued tones his life as corporate takeover strategist and unabashed capitalist.

Since 1977, Simmons has bought and sold stock in 16 companies, taking profits of $328.9 million, holding the stock for periods as short as a month to as long as three years.

His biggest absolute gain came in 1987 when he sold his 17.9% stake in GAF Corp. for $197.9 million three years after investing $58 million.

Not a Greenmailer

Simmons denies that he has ever been a greenmailer.

“Greenmail is when you threaten a company and you go sell your stock to the company so they’ll get rid of you and nobody else gets to sell their stock,” Simmons said, whereas all stockholders benefit from his activity.

“I definitely have a shareholders’ perspective,” Simmons said. “I’m not doing that altruistically. I’m doing that because it’s in my own self interest to do it. I think that’s good for my other shareholders because they go along with me: If I do well for myself, then they do well for themselves.”

Simmons also has kept a fair share of his holdings, the most valuable stemming from his 1986 purchase of NL Industries Inc. for about $300 million. The investment now is worth an estimated $1.2 billion.

Another key play was the 1982 buyout of Amalgamated Sugar Co. in a $35-million deal. He later sold an unprofitable joint venture for $30 million, giving him a total cost of about $5 million for the company. He said he recently turned down more than $330 million in cash for the sugar-beet processor.

Simmons said his decisions to keep or sell, and whether to take a company private or leave it public are both based on money.

“If I had all the money in the world, I wouldn’t have any public companies. The minority interest in NL Industries would cost about $650 million to $700 million, . . . so I’ve got to evaluate that alternative vs. the alternative of just buying something else. In this case, my decision is to leave the minority interest in there. Let them be partners, let them prosper if I do.”

As for operating a company, “I very seldom buy or take a major stock position in any company that I would not be willing to buy all that company at the price I’m paying for it,” Simmons said.

“Many people think you just decide there’s a company you want to buy, period, and you want to buy it regardless of what it costs. I don’t.

“I want to buy a company if I can buy it for what I think is less than it’s worth to me,” he said.

“If it gets higher than that, I’ll sell.”