Weill Rumored Ready to Make a Comeback

Wall Street is speculating that Sanford I. Weill is about to make his big comeback.

Weill, chairman and chief executive of Primerica Corp., vowed to return to the financial services industry in a big way when he left Shearson Lehman Hutton five years ago after losing a power struggle with American Express’ top man, James D. Robinson III.

Now he’s rumored to be talking to Robinson about buying Shearson, which has languished with losses, management changes and souring loans for leveraged buyouts.

Shearson said it has held only preliminary discussions about conducting joint ventures with Primerica’s brokerage subsidiary, Smith Barney, Harris Upham & Co. Primerica refuses to comment about the rumors.

But securities analysts said American Express is anxious to unload the brokerage and Weill’s the man who could make it work.

“Shearson is very much in the same position as Smith Barney was a few years ago,” said Joan T. Goodman, vice president with Pershing & Co. in Chicago. “They have a lot of problems, and most of them are related to management, expense control and these highly leveraged transactions.”

American Express, which bought Shearson Loeb Rhoades from Weill in 1981, has also been looking to sell the troubled company, Goodman said. But partly because the brokerage industry is in a slack period, it has not been able to find any serious buyers.

Enter Weill, who has a reputation for thriving while his competitors suffer.

The scrappy 56-year-old started his career as a runner on Wall Street in 1955. Five years later, he and three friends started their own brokerage--called Carter, Berlind, Potoma & Weill--with $215,000 they had scraped together.

Over the next two decades--often while his competitors were folding and scaling back--Weill picked up a series of struggling brokerages at bargain prices. The firm, which went through a laundry list of merger-related name changes to become Shearson Loeb Rhoades, thrived by slashing overlapping operations, cutting jobs and less profitable branch offices.

Meanwhile, he spurned costly advertising programs and stressed sales by creating a compensation schedule that hurt low-producing brokers and greatly rewarded those who pulled in a lot of business. Support staffs got similar treatment.

In fact, at one point Weill decreed that analysts who failed to visit Shearson brokers while out in the field would have to pay for their own travel expenses. It was a strong motivator, forcing both analysts and salespeople to stay on top of the business.

Weill’s belt-tightening moves weren’t limited to layoffs, either.

When analysts Jim Dowling of Furman, Selz, Mager, Dietz & Birney was recommending a Weill-operated company, Commercial Credit Co., to institutional investors, Dowling told them he knew from experience that Weill was a man who could cut costs. Dowling took two pay cuts years earlier while working for Weill at Shearson.

Everyone--including Weill--took pay cuts in those days, said Mary McDermott, a spokeswoman for Primerica who also worked for Weill at Shearson. And salary increases didn’t quickly make up for them either.

“He feels very strongly that you have to keep your costs under control during boom times as well as bust,” McDermott said. “If you do that well, you will be able to capitalize on opportunities when times are not that good.”

After leaving Shearson, Weill took the helm of Commercial Credit, a subsidiary of Control Data Corp. Weill took the company public, and soon thereafter the once sleepy consumer finance firm launched a $1.7-billion bid for Primerica Corp.

The takeover was completed in late 1988. And Weill has spent the last year paring back Primerica’s diversified operations and trying to pull its various subsidiaries, including Smith Barney, into the black.

It is impossible to say how much of an impact he’s had on the company’s bottom line because Primerica’s 1989 earnings are not directly comparable to previous years’ results because of the merger. However, analysts and sources at Smith Barney believe that Weill’s influence has turned around the once-ailing brokerage.

“He’s had a tremendous positive impact,” said one Smith Barney executive who asked not to be named. “Before he took over, there were rumors every day that we were about to be sold. There was tremendous inertia and a total lack of direction. Nobody did any work, they just read the paper to find out where they might be working tomorrow.

“But these guys come in and they’re smart and they’re focused and they know the business. There’s been a complete change in attitude.”