Investment Banker Sees Value of a Dicey Market
Most people don’t wish for a troubled stock market, but for “value” investors such as Michael E. Tennenbaum, trouble can spell greater opportunities.
Tennenbaum, a fixture in the Los Angeles financial community, spent more than 30 years as an investment banker with Bear Stearns & Co. before setting up his own firm, Tennenbaum & Co., in 1996.
Since then, he has done a string of deals, including some with deep-pocketed partner Mass Mutual. Tennenbaum’s investment funds provide leveraged finance, buy high-yield debt and take equity positions in companies Tennenbaum believes the market has undervalued.
Last week, two funds of Special Value Investment Management, a firm controlled by Tennenbaum and his partners, made a $15-million equity investment in Newport Beach-based Water Pik Technologies. The stock purchase boosted Tennenbaum’s stake in the firm to about $20 million and made him the company’s largest shareholder.
“Water Pik was a very small part of a very big company for many years. As a consequence, the [parent] didn’t spend a lot of time and effort on it,” Tennenbaum said.
Water Pik was spun off from parent Allegheny Technologies Inc. in late 1999. A new management team is updating Water Pik’s products and adding new ones, such as designer misting shower heads and a home swimming-pool fountain that includes a light show.
The stock (ticker symbol: PIK) got a lift last week on news of Tennenbaum’s latest purchase. It closed Friday at $7.56 on the New York Stock Exchange.
Michael P. Hoopis, Water Pik’s chief executive, said the investment by Tennenbaum’s funds will help the firm focus its resources on new products to fuel growth.
Tennenbaum has a long record of financing major deals, some of them controversial. In 1998, he made a $208-million unsolicited bid to acquire Whittaker Corp., a Simi Valley aerospace parts company. The bid didn’t succeed.
While at Bear Stearns, Tennenbaum was a principal advisor and financier to hotel-casino giant MGM Grand in Las Vegas, oil refiner Tosco Corp. and the state of California on the privatization of Blue Cross of California.
He also was involved in the large debt restructuring in the mid-1990s for Jenny Craig Inc., the weight-loss firm.
More recent deals by Tennenbaum include purchasing a controlling stake, then reorganizing Pemco Aviation Group, a large aircraft-maintenance company in Alabama; and purchases of a combined $30 million in bonds of two Southland companies that went private last year, Veterinary Centers of America Inc. and Sunrise Medical Inc.
Tennenbaum has three partners: Howard M. Levkowitz, an attorney; Mark K. Holdsworth, a former investment banker at Libra Bancorp; and David Sacherman, a former chief investment officer for Orange County real estate baron George Argyros. Tennenbaum said he expects to be hiring a new partner and several associates.
Tennenbaum’s investment strategy is to focus on established businesses in growing industries and gather strong management teams for the companies, he said.
His value-oriented style also means he’s looking for a good price when he takes a stake--which is another way of saying he doesn’t want to overpay for an investment.
With the turmoil in the stock market and the corporate bond market during the last year, value investing has earned new respect on Wall Street. Many value investors also have been finding more attractive opportunities as skittish investors flee the markets.
“Usually in a portfolio, you have some big winners and some big losers. The trick is to keep the big losers to a minimum,” Tennenbaum said. That’s easier to do when you pay a reasonable price to begin with, he said.
That, of course, has long been the strategy of another well-known value player: Warren Buffett.
“I wouldn’t have the temerity to use my name in the same paragraph as Warren, except when I quote him, which is frequently,” Tennenbaum said. “We do have some of the same strategies. I would aspire to be Warren. And perspire too.”
Finance Briefs: Entrepreneurs looking for tips on how to get their businesses funded in 2001 might check out Funding Your Venture, a forum on Jan. 16 at 7 p.m. on the Caltech campus. The event is sponsored by the Caltech/MIT Enterprise Forum, a group started in 1984 by Caltech and MIT alumni.
“The landscape has changed. The ‘dot-coms’ have gone down in flames, and the questions finance people are going to ask of entrepreneurs are tougher and tougher,” said Nick Nichols, director of the Industrial Relations Center at Caltech.
The panel will include a venture capitalist from Smart Technology Ventures, an investment banker, and two entrepreneurs.
For more information, go to: https://www.caltech.edu and click on the events calendar. . . .
A new Web site bills itself as a network for women entrepreneurs looking for investment capital. The site, https://www.seekingcapital.com, was started by Liz Briggs and Robert Pagliarini, both of whom worked at the online division of Beverly Hills-based brokerage J.B. Oxford.
The site solicits women’s business plans. If an entrepreneur’s plan is accepted for listing in the site’s database, the fee is $195 a quarter. If an entrepreneur finds an investor through the site, SeekingCapital takes a 5% finder’s fee.
The idea has plenty of competition, such as Garage.com. “You have to ask what they offer that their competition doesn’t,” said Jon Goodman of the Annenberg Incubator Project in Los Angeles. She said the best way to find financing is via personal relationships, such as through an entrepreneur’s lawyer or accountant.
*
Times staff writer Debora Vrana can be reached at debora.vrana@latimes.com.
