News story from the Indianapolis Star:
Conseco's new CEO lifts investors' spirits
Troubled financial services firm picks a proven leader, sending shares up 17 percent.
By Christopher Carey
Indianapolis Star
June 30, 2000
Gary C. Wendt, Conseco Inc.'s designated savior, did little more than show up Thursday, and the company's stock jumped nearly 17 percent.
Wendt's appointment as chairman and chief executive has employees and investors salivating about what might happen if he fixes the company's financial problems and energizes its operations.
Conseco's stock has soared 57.6 percent since the beginning of the week, when reports of the company's negotiations with Wendt intensified.
The shares closed at $9.06 Thursday, up $1.31, in heavy trading on the New York Stock Exchange.
Conseco lured Wendt, the former head of General Electric Capital Services, with a five-year employment contract that will bring him tens of millions of dollars if the company's stock keeps climbing.
David V. Harkins, a Conseco director who had been serving as interim chairman and CEO, called Wendt his first choice for the job.
"Gary has clearly demonstrated the ability to run a major financial services company," Harkins said. "During his 15-year tenure running GE Capital, profits increased from approximately $300 million to $4 billion."
But Wendt proved in his first day on the job that he is not infallible.
He made the rookie mistake of mispronouncing "Carmel" in a conference call with reporters, putting the accent on the latter syllable.
Wendt, who has been living in Connecticut, said he plans to establish a home in Indianapolis.
His decision to lend his credibility and business acumen to Conseco's turnaround effort is a "very, very positive first step" for the company, said Colin Devine, an analyst for Salomon Smith Barney in New York.
"I think they have got the ideal candidate for the job," said Devine, who was one of former Chairman Stephen C. Hilbert's biggest detractors.
Devine said Wendt's hiring also is good news for Indianapolis and the roughly 3,700 people who work at Conseco's headquarters.
The 58-year-old executive said Thursday he is looking at Conseco as a sort of second act in his celebrated career.
"Not many people get to start over again in life," he said. "I think this is a fascinating opportunity for me to do so."
Wendt declined to discuss his compensation package, saying Conseco would provide the details later in a filing with the Securities and Exchange Commission.
But according to several reports, Wendt would forgo a salary for the first two years and get warrants to buy 10 million shares of Conseco stock at Tuesday's closing price of $6.19 a share.
At Thursday's closing price, he already would have more than $28 million in paper profits on those warrants.
In addition, Wendt would get a $50 million bonus when the stock reaches $20 a share.
"He's rolling the dice," said Ira Zuckerman, an analyst for Nutmeg Securities Ltd. in Westport, Conn. "Luckily for shareholders, they're not risking much up front."
Wendt said his two priorities would be tackling the financial problems at the parent company while preserving the vitality of its insurance subsidiaries and other operating units.
But after an introductory meeting with 150 Conseco executives, he said it was too early to say what moves the company would make to meet those objectives or how soon it would make them.
"There will be no time frame put on any decisions," he said.
Conseco put its consumer finance unit on the sale block at the end of March, less than two years after it bought the business -- then known as Green Tree Financial Corp. -- for $6 billion in stock.
Conseco's shares were trading for nearly $57 at the time. They fell 15 percent the day the deal was announced and continued drifting downward, bottoming out at $4.50 on May 16.
As interim CEO, Harkins established four goals for the company:
¥ Complete the sale of the finance unit.
¥ Complete the sale of other noncore assets, such as Conseco's 29 percent stake in Argosy Gaming Co.'s riverboat casino in Lawrenceburg, Ind.
¥ Reduce debt and strengthen the company's capital structure.
¥ Boost the profitability of its insurance businesses.
Wendt said he would stick to the course that Harkins had set, while considering all options.
Conseco's finance unit has attracted few buyers. The operation provides mortgages for manufactured homes, makes home-equity and home-improvement loans and issues credit cards for retailers.
Conseco has some $800 million in bank credit lines that come due in September and are critical to the continued operation of the finance unit, said Mark Girolamo, an analyst with Deutsche Bank in New York.
"His credibility should be an asset in dealing with banks and other lenders, and his contacts and expertise could certainly be a positive force in getting units sold or turned around," Girolamo said.
Although he spent 24 years at General Electric, Wendt is no stranger to Conseco or its executives.
"I've known Conseco for a long time, and they've known me for a long time," he said.
GE Capital is in some of the same lines of business as Conseco, and the two companies talked periodically about buying assets from each other, he said.
Wendt was one of GE Chairman John Welch's key lieutenants before leaving the company in 1998. He said his work at Conseco would emphasize three of his former employer's fundamentals for success -- quality, productivity and growth.
New CEOs often bring in their own allies to implement their strategies, especially in turnaround situations. But Wendt said he was not planning any major personnel moves at Conseco.
"As best I can tell, the Conseco management team is a pretty darn good one," he said. |
