Group Readies Executive Life Bid : Insurance: Recording mogul Geffen says his investors are ‘quite far along’ and expect to submit a buyout plan before the court’s deadline.
An investment group that includes recording industry mogul David Geffen, Texas investor Richard Rainwater and money manager Bechtel Investments confirmed Tuesday that it is preparing a bid for the failed Executive Life Insurance Co.
Though the investors would not reveal further details, Geffen said they were “quite far along” in preparing a bid and that they expect to submit a buyout plan before Oct. 11, the court-imposed deadline.
Geffen, who previously teamed up with Rainwater to invest in Honeywell Inc., said his group believes that there are great opportunities in the life insurance industry.
“The life insurance industry is bleeding from a tremendous amount of mismanagement,” he said. “We look at this as an opportunity to buy a company where all the problems have been taken care of and operate it with excellent management.”
The news of the latest bidder comes just a week after an industry led group, headed by National Organization of Life and Health Insurance Guaranty Assns., would submit a bid that would include $1 billion from state guaranty funds.
The only formal bid submitted thus far has come from a French investment group. Under that proposal, Altus Finance, a unit of Credit Lyonnaise bank, would acquire Executive Life’s junk bond portfolio for $2.7 billion and a consortium headed by Mutulle Assurance Artisanale de France would provide $300 million in working capital and operate the new company.
A partnership headed by San Francisco investment bankers Hellman & Friedman and Samuel Zell of Chicago is also considering making an offer for Executive Life. Holders of a chunk of guaranteed investment contracts issued by Executive Life have also promised to submit a bid for the company.
The growing buyer interest in Executive Life, which has assets of about $10 billion and was seized by California regulators in April, has boosted the hopes of the company’s 400,000 policyholders, who at one point were fearful of losing all that they had invested.
“We certainly welcome the competition,” said Donn Sigerson, a Los Angeles retiree who has a large policy with Executive Life. “Everything I have seen (about the competing bids) makes me think we are going to get more back than we thought before.”
Insurance regulators said they were also encouraged by the apparent interest. However, they could not comment about the viability of any offers other than the Altus plan, because none have been formally submitted.
“Clearly this shows that the competitive bidding process is the way to go to ensure that policyholders received top-dollar in the sale of Executive Life,” said Bill Schulz, a spokesman for the California Department of Insurance. “As the deadline draws near, potential bidders are becoming more public. As the commissioner said late last week, we expect certainly as many as three substantial bids to emerge.”
The Geffen, Rainwater and Bechtel group clearly would make a substantial bidder.
Geffen, who now operates Geffen Films Inc., reportedly made his first million before he turned 25. He started Asylum Records, which was sold to Warner in 1972 for $7 million, after which he invested in real estate and art.
In 1977, he founded Geffen Records, which became the industry’s third-largest label. Then, in an attempt to cash in on record industry consolidation, he sold Geffen Records to MCA for $545 million worth of MCA stock. When MCA was sold to Matsushita Electric Industrial Co. last December, Geffen cashed in those shares for $710 million.
Rainwater, meanwhile, is credited with making a fortune for the Bass family of Texas. In a 16-year stint as the Bass family’s primary deal maker, he reportedly engineered highly lucrative investments in everything from Texaco to Walt Disney Co. Profits on the Texaco and Disney deals alone amounted to roughly $1.3 billion.
Since striking out on his own in 1986, he’s been involved in restructurings and buyouts of Honeywell, Hospital Corp. of America and Penrod, the former oil drilling company of the Hunt brothers of Dallas. His net worth was recently estimated at $350 million by Forbes magazine.
Bechtel Investments, which is affiliated with the San Francisco based engineering and construction giant, is a money management firm with $3 billion under its control. It specializes in oil and gas, real estate, mutual fund assets and small companies.
