Sitting in his 34th floor suite in a downtown Dallas office building, James J. Ling does not fit the image of a legendary Texas wheeler-dealer. This is not some swaggering cowboy. Indeed, the only cowboy hat in the place had arrived atop a retired British army colonel with an investment proposal to promote. Ling himself displays less pretension than the average hotel desk clerk. And while he is, at 61, quite trim and a good six feet tall, he hardly seems like "a Texas titan," as he was characterized in the title of Stanley H. Brown's 1972 biography.
Nonetheless, the man is a legendary figure. Fifteen years ago his name was almost a household word. He was the most notorious of the conglomerators, men who collected and traded business assets the way boys collect and trade baseball cards. The media dubbed him "Jimmy Ling, the Merger King," as he notched his way up the Fortune 500 list with acquisition after acquisition. Today he would probably be called a "paper entrepreneur."
Ling, for his part, insists that he was -- and is -- a real entrepreneur. It may have looked as though his only interest was in building the biggest company possible, he admits, but he was actually breathing new life into moribund institutions. He created real value, he says, in the corporate structures he built then and in the ones he is building now.
Ling achieved fame by parlaying his first company, a Dallas electrical contracting business started in 1947, into LTV Corp., by 1969 the I4th largest industrial corporation in the United States. Along the way, he developed a hefty reputation. A friend of Lyndon Johnson, he had the antitrust book thrown at him by Attorney General Robert Kennedy. Wall Street alternatively loved and hated him, the state of the relationship being reflected in the mercurial market price of LTV stock, bonds, and convertible debentures. He baffled his board and his bankers with acquisition and refinancing schemes that defied conventional explanation. At the height of his corporate power, Ling controlled companies with such familiar names as Braniff Airways, Jones & Laughlin Steel, Wilson Sporting Goods, and dozens of lesser-knowns in industries as diverse as electronics, military aircraft, meat packing, and pharmaceuticals. LTV's consolidated revenues in 1969 came to $3.75 billion.
But as Ling rose by the deal, so did he fall. In 1969 his latest and largest acquisition, Jones & Laughlin, had attracted new attacks from government trustbusters, and the steel company itself was not helping the parent's earnings. Ling was ousted from LTV in 1970 by a board that had, for good reason or not, lost faith in his capacity to keep so monstrous a business afloat in an economic sea that was becoming increasingly hazardous.
LTV survived, but Ling's departure left it just another large institution. It was ITT without Harold Geneen, the UAW without Walter Reuther, the SCLC without Martin Luther King Jr.
Ling himself dropped abruptly out of the news and out of the public eye -- until 1979, when the financial pages discovered him in the midst of a takeover attempt for Texas International Co., a crippled former high-flier in the oil and gas exploration, drilling, and well-servicing business. Ling lost his bid for Texas International (although he pocketed as much as $10 million from stock profits in the process), but his name popped up again and again in small news items that first had him associated with names like Gold Crown Resources, then with Matrix Energy, later with L. G. Williams Oil, and finally with Xenerex. It began to look like classic Ling -- convoluted deals involving paper swaps, reverse mergers, public offerings, debt restructurings -- only this time there were new wrinkles -- roll-outs and something Ling calls "fungibilizing." The former conglomerator, it turned out, was building a new business, this time in the oil patch. "We're a deal company," he says. "We just happen to be dealing in the energy business."
Dealing is what Jim Ling does. "Ling was an architect and a leader rather than a manager or administrator," wrote biographer Brown. "To ask how he managed his companies was almost to miss the point of what he really was doing."
While other corporate moguls of his age and experience hold strong, well-articulated views on issues of public policy, the state of the economy, the Communist threat, the latest Internal Revenue Service attack on tax shelters -- that sort of thing -- quizzing Ling on these topics elicits pleasant but not very interesting responses.
Brown observed that the largely self-educated Ling had no sense of history or of his place in it, that he rarely generalized from his experiences. To Ling, "what happened happened," Brown wrote in 1972. Twelve years have not changed the man. He is still no less, but no more, than an extraordinary deal-maker, a financial Beethoven who can visualize a symphony where others hear only a tune. A young financial analyst, according to Brown, once traced out a Ling deal on a restaurant tablecloth, laid down his pencil, and said, "That proves that you can get something from nothing." And that -- creating a rather substantial something from nothing -- is what Ling claims his deals do.
In 1965, for example, LTV was in a sales slump, and its stock price was depressed. Growth momentum had ground to a stop, so Ling launched Project Redeployment, an exchange of stock so complex that the prospectus describing it ran to 80 pages. The basic idea, however, was elegant and simple.
At the time, LTV had business in three distinct industries -- aerospace, military electronics, and consumer electronics. Ling created three new corporations, one in each industry, and sold the appropriate LTV assets to these new subsidiaries in exchange for their stock. The stocks of these newly created corporations thus became LTV's principal asset. Ling then created a market for these new stocks by offering a limited number of them to investors in exchange for their LTV shares.
The result of all this paper manipulation was slightly amazing to everyone except, presumably, Ling. Where investors had been bearish on LTV, they were bullish on the prospects for the three new companies. Disregarding the fact that these subsidiaries were still under the same LTV corporate management, investors bid up the price of the new stocks, most of which were still held in the LTV treasury. Thus, by creating four companies where there had been only one, Ling converted LTV's physical assets into stock, which had a higher collateral value to banks than the plant and equipment that stood behind them. Now LTV could get back on the acquisition trail using bank loans that it couldn't have secured earlier.
The next year, Ling followed much the same strategy after LTV acquired Wilson & Co. He split Wilson into three parts -- meat packing, sports equipment, and pharmaceuticals. He then sold these parts to three newly created corporations -- Wilson & Co. (meat packing), Wilson Sporting Goods, and Wilson Pharmaceutical & Chemical -- in exchange for their stock. He also transferred much of the debt LTV had incurred in making the original acquisition to these three subsidiaries. When the stocks of the three companies began to trade publicly, investors liked them much better than they had liked the old Wilson shares. The three new corporations raised $44 million in new equity by selling additional stock and used much of this equity to pay off the debt LTV had incurred in buying them originally.
Beyond replenishing LTV's acquisition war chest, was there any economic point to this financial legerdemain? Ling insists that there was, even suggesting that redeployment, as practiced by him at LTV, had much the same revitalizing effects as the corporate spin-offs and leveraged buyouts being done today under the rubric of deconglomeration. "There's no reason," he says, "why a sporting goods company should necessarily be sister to an airplane company when the sporting goods company has a 20 [price/earnings] multiple and the airplane company's is 8. They should have their own separate financing and their own objectives. . . . Take Wilson. We bought a company that sold for $21 or $22 for many years, and we converted that dead company into an IRS asset. We paid $55 a share. . . . Then we cleaned up the management and made them more efficient. . . . In the three years after we acquired them, they earned three times what they'd earned in the previous five years."
At Xenerex, Ling has set himself the same task -- making something out of nothing -- using variations on some of the same techniques he once used at LTV.
* Roll ups. Xenerex will offer to buy out the interests held in 130 to 150 wells by people Ling calls the "Toms, Dicks, and Harrys" -- investors who each own maybe a 1% or 2% interest in wells of which Xenerex also has a piece. Instead of waiting for their payments to dribble in over the next 10 years, these investors, presumably, will sell their interest to Xenerex at something like 25 cents on the dollar and agree to take their payment in shares of Xenerex common or preferred stock, which can then be sold on the OTC market. The roll up gives Xenerex oil and gas reserves and long-term income without requiring a cash expenditure.
* Fungibilizing. That is Ling's word for a barter arrangement for the mutual benefit of Xenerex and oil-field suppliers -- the people who drill and service wells. Suppliers, hurt by the dramatic fall-off several years ago in exploration and drilling, presumably will agree to put their idle equipment to work for Xenerex in exchange for a little cash and a share of the wells' future production. Banks that hold mortgages on the suppliers' equipment for which there is no market, Ling says, have little choice but to help these companies get back to work.
* Acquisitions. Hundreds of failed or failing companies, says Ling, are sitting on acreage or wells they can't develop. "We'll apply fungibility to the operators, roll up to the investors, and make a deal with the banks that own all the stock."
Ling would be further along than he is if he hadn't almost died two and a half years ago from a bout with Guillain-Barre syndrome, a nerve-damaging illness that left him temporarily paralyzed everywhere but in his left eyelid. "They gave me the last rites . . . and I was thinking, 'That's not really happening to me.' The doctor didn't give me much chance that day." He recovered, regaining almost full use of his body. The experience, he says, improved his appreciation of people's needs. "Problems had always happened to somebody else. Never to me. . . . God, I hate to think about that time. If I ever had to confront it again . . ." He points an imaginary gun into his mouth.
At the moment, Ling is quite happy at Xenerex. If he can pull off his latest scheme, he says, the company will soon be among the two or three hundred largest independent oil companies in the United States.
But can a man who once made deals calculated in 9 and 10 figures find happiness dealing in mere millions of dollars?
"I think about that sometimes," Ling says, "I don't worry about it, though. It's not a game we play, but it really amounts to competing in whatever the hell you're doing. If this thing works in the way we want it to work, I will probably wind up getting as much gratification as I got putting LTV together. This is a tougher job . . . in an environment that is just unbelievably bad. . . . On the other hand," he trots out a favorite aphorism, "with the problem comes the opportunity."
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