>I can't believe USW directors are giving away the company like this. Betcha big shareholders sue the board for, if nothing else, being brain dead.
bob.
does that mean you'll be taking your loot elsewhere? i have to admit, i'd never heard of global crossing previously, but right now, i'm more inclined to select their shares.
would appreciate your feedback.
fwiw, a lengthy article on winnick in today's ny times follows.
thanks,
-chris.
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May 18, 1999
Winnick Weaves a Single Cable Into an Empire
By ANDREW POLLACK
LOS ANGELES -- Two years ago, Gary Winnick, a financier with little experience in telecommunications, undertook a project to lay an optical fiber cable across the Atlantic Ocean.
Overnight, Winnick has become the telecommunications industry's newest, and by far one of its richest superstars.
With its announcement today that it is merging with U S West Inc., Winnick's company, Global Crossing Ltd. has entered the ranks of the nation's major telecommunications companies.
And Winnick has parlayed his initial personal investment of $15 million in the trans-Atlantic cable into a roughly 25 percent stake in Global Crossing worth more than $6 billion. That will make Winnick, 51, the largest shareholder in the company formed by the merger.
The stunning rise of Winnick and of Global Crossing is at least partly the result of investor frenzy for anything related to the Internet. Global Crossing's stock, which was priced at a split-adjusted $9.50 when first offered to the public Aug. 14, closed today at $60.25.
But Winnick, a former aide to Michael R. Milken, has been quick to seize upon the opportunity provided by the soaring stock to build an empire through mergers, not only with U S West but also with the Frontier Corporation, a long distance company that Global Crossing agreed to acquire in March.
"I think he'd be the first to say he didn't envision what you see today," said Lodwrick M. Cook, the co-chairman of Global Crossing with Winnick. But he added: "He saw the opportunity to build quickly. He's the driving force behind the whole thing."
Winnick, who prefers to operate behind the scenes, agreed. "Sometimes things happen," he said. "But you need to get to the plate to have things happen."
Winnick is described by those who know him as a master salesman with a quick wit. He is also driven, even conducting evening business meetings while exercising on the treadmill in his Beverly Hills office, with company executives sitting around him. While Global Crossing is supposedly based in Bermuda, its executives work in Beverly Hills in the same building used by Pacific Capital Group, Winnick's investment firm.
He has been willing to spread the instant wealth his company has generated in order to quickly do mergers and recruit experienced executives. "He's actually one of those businessmen who does go for the win-win situation," said an investment banker who has worked with him. "He's not looking for the last nickel on the trade."
Winnick grew up in Roslyn, N.Y., and earned a degree in economics from C. W. Post College in Greenvale, N.Y. He worked in New York as a bond salesman for a predecessor of Drexel Burnham Lambert, and then transferred to the company's Los Angeles office in the late 1970's to become a close aide to Milken, who pioneered the market for junk bonds.
Winnick left Drexel in 1985, several years before the firm's collapse, to start his own investment fund, Pacific Asset Management. Milken was an investor in that fund, but he is not in Winnick's current company, Pacific Capital Group. Winnick was ordered by a court to testify in Milken's case in exchange for immunity from prosecution, but Milken, charged with violating securities laws, reached an agreement with prosecutors before the testimony took place.
Until Global Crossing, Winnick was a low-profile financier with mixed results. A furniture chain and a mattress company he bought in the late 1980's both declared bankruptcy within weeks of each other in 1991. He had more success with the Ornda Healthcorp, a hospital company he sold to the Tenet Healthcare Corporation, and with Optel, a company that provided cable television service to apartments and was sold to Le Groupe Videotron. Winnick also owns a 27 percent stake in Playa Vista, a real estate development in Los Angeles in which Steven Spielberg's Dreamworks SKG will be building its studio.
Winnick said he was drawn to the trans-Atlantic cable project that became the seed of Global Crossing because deregulation and new technology are opening the telecommunications industry to new players.
Pacific Capital turned to CIBC World Markets, part of Canadian Imperial Bank of Commerce, to finance most of the $750 million needed for the project. Funds associated with CIBC now own about 94 million shares in Global Crossing, worth $5.66 billion, making the transaction "without a doubt" the most profitable investment the company has ever made, said Dean Kehler, managing director and co-head of the high-yield group at CIBI World Markets.
Most undersea cables had been installed by consortiums of big telephone companies. With less bureaucracy, Global Crossing was able to move quickly, and finished the cable in time to catch a huge spurt of demand generated by the Internet.
"There was a huge pent-up demand and there was not enough capacity to meet it," said Michael Ruddy, a fiber optic analyst with Pioneer Consulting in Cambridge, Mass. Global Crossing fashioned itself as a carrier's carrier, selling capacity to telephone companies, not to end users. With the success of that first cable, still the only one the company has in operation, Winnick decided to turn that one project into a company and to build a worldwide network of trans-oceanic and terrestrial fiber optic cables linking the world's major cities.
Its agreements to merge with Frontier and U S West move Global Crossing toward becoming a full-fledged telecommunications carrier, serving both the retail and wholesale markets. That could add risks because other carriers, now its competitors, will be more reluctant to buy transmission capacity from Global.
Winnick has positioned Global to be a major telecommunications player by hiring a team of experienced executives, all of whom have become wealthy. Winnick has given stock to everyone in the company and to others close to him, including his housekeeper. Former President George Bush accepted stock in lieu of an $80,000 fee for making a speech at a Global Crossing event. That stock is now worth millions of dollars.
Cook, who had retired as chief executive of the Atlantic Richfield Company, was brought on early as vice chairman. Earlier this year, Winnick recruited Robert Annunziata, who had founded and built Teleport Communications, a company acquired by AT&T for $12 billion last year.
The recruiting has made Global Crossing top heavy by conventional standards, with two chairmen, two vice chairmen, a chief executive and a separate president. Winnick has been content to let others have the titles, knowing that he is the owner. But those involved in the company say there is little doubt about who is in charge.
Indeed, Winnick will not have an executive position in the company after it merges with U S West. Annunziata and Solomon D. Trujillo, the head of U S West, will be co-chairmen and co-chief executives. Winnick would not comment on his role in the combined company, but others say he will be on the board and remain a power behind the scenes.
"I don't think he'll ever turn his back on Global," Cook said. "He will do other things, yes, but he will be involved in Global."
nytimes.com |
