Tom Richman

Jim Ling

 

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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