Saul Steinberg (business)

This article is about the financier. For the cartoonist, see Saul Steinberg.

Saul Steinberg (born 1939) is a former financier, insurance executive, and corporate raider. He started a computer leasing company (Leasco), which he used in an audacious and successful takeover of the much larger Reliance Insurance Company in 1968. He is best known for his unsuccessful attempts to take over Chemical Bank in 1969 and Walt Disney Productions in 1984.

Background

Steinberg was born in 1939 and grew up in Brooklyn, NY where his father was involved with the Ideal Rubber Company of Brooklyn. Steinberg finished a degree from Wharton School of the University of Pennsylvania in Philadelphia. He is listed as a member of the class of 1959 although some accounts have said that he graduated in two years at age 18.

Business career

In 1961, at the age 22, Steinberg founded Leasco Data Processing Equipment Corporation, a computer leasing company that leased IBM computers. While at Wharton, Steinberg had written a paper about IBM, and he had learned that IBM was charging premium prices to lease its computers. Steinberg discovered that he could offer computer leases that would undercut IBM's prices and still obtain bank financing for the entire purchase price of the computers by using the signed leases as collateral with lenders. Leasco grew rapidly, and in 1965 went public.

In an audacious move, Leasco bid to acquire Reliance Insurance Company, a Philadelphia insurance company 10 times the size of Leasco. Reliance had been in business 150 years, having been established in 1817 to provide fire insurance. It was managed conservatively. Insurance companies have lots of liquid funds, which is just what computer leasing companies need. Steinberg offered the Reliance shareholders a combination of convertible subordinated debentures and common stock warrants (rather than cash). Reliance management resisted but eventually capitulated, and Leasco was successful in assuming control of Reliance in 1968. Steinberg was age 29 when he took over Reliance.

The following year, in 1969, when he was 30, Steinberg attempted to take over the $9 billion Chemical Bank, then one of the nation's largest financial institutions. The attempt failed and earned Steinberg the enmity of the New York financial community and a reputation for brashness.

Nonetheless, Steinberg became the CEO of Reliance, and he and his brother were the senior managers of Reliance for the next thirty years. Steinberg took on large amounts of debt during the junk bond era and grew, apparently by underpricing its insurance policies. The company paid out dividends to the shareholders, including the Steinberg family members as major shareholders, and paid Saul Steinberg large sums in compensation.

At Reliance, Steinberg hired dealmaker Henry Silverman, who would later become widely known as the CEO of Cendant. In 1986, while Silverman was at Reliance, he and Steinberg were involved in acquiring Spanish language television stations, and creating the Spanish-language media company, Telemundo.

In 1995, Steinberg had a serious stroke, which he tried to keep quiet. He was forced to step back from management of the company. The high leverage, too-low pricing on insurance policies, and other problems eventually led Reliance to experience escalating financial problems. There was an attempt to sell the company. Reliance Group negotiated a transaction to be sold to Leucadia National in 2000 for stock and the assumption of debt. However, this transaction fell apart in July, 2000.

Reliance filed for bankruptcy in 2001 and entered into a long process of liquidation. Steinberg was forced to sell his extensive art collection and also to sell his duplex apartment at 740 Park Avenue in Manhattan, which was bought for $37m by Stephen A. Schwarzman of the Blackstone Group.

Involvement with Wharton

Steinberg has been a major benefactor of The Wharton School at the University of Pennsylvania. He served as chairman of Wharton's Board of Overseers for over 15 years and continues as a member of the board. The Steinberg name is highly visible at Wharton, most notably attached to Steinberg-Dietrich Hall, which served as the main undergraduate building, containing classrooms, lounges, computer labs, and departmental offices. The Steinberg Conference Center serves as home to the Executive Education Center and the Aresty Institute of Executive Education. Additionally, Steinberg endowed the Saul P. Steinberg Professor of Management chair.

Family and personal life

Steinberg met his first wife, Barbara, in high-school, and they would have three children, Laura, Jonathan, and Nicholas, before divorcing in 1974. Steinberg's son, Jonathan ("Jono") is married to CNBC host Maria Bartiromo. Jono is the CEO of mutual fund company Wisdom Tree. Steinberg's daughter, Laura, married Loews executive Jonathan Tisch. She and Tisch later divorced, and she married Stafford Broumand, a plastic surgeon.

Steinberg divorced his first wife after he met Laura Sconocchia Fisher in 1974; they married and had a son, Julian, before divorcing. In 1983, Steinberg married Gayfryd (McNabb McLean Johnson) Steinberg, who also had been married twice before. Steinberg would adopt Gayfryd's son from a previous marriage, and they had a daughter together. Gayfryd is a trustee of the New York Public Library.

In 1989 Steinberg hosted an opulent 50th birthday party for himself that included live models depicting his favorite Renaissance paintings.

Steinberg's brother Robert or "Bobby" worked as a senior executive at Reliance, helping Steinberg run the company for many years. In 1999, as Reliance encountered severe financial problems, Saul Steinberg fired his brother, and the brothers became estranged from one another. Steinberg's mother, Anne Steinberg, sued him for unpaid loans in 2000.

In 2000 Steinberg sold his apartment at 740 Park Avenue in New York City to financier Stephen Schwarzman of Blackstone Group for a reported $30 million. The apartment had once belonged to John D. Rockefeller.

Charitable Gifts

In 2000 Steinberg donated a large painting from 1614, "The Death of Adonis" by Peter Paul Rubens, to the Israel Museum in Jerusalem.

Further reading

• Insurance Journal: Reliance Files For Bankruptcy
• Forbes Face: Saul Steinberg June 18, 2001
• "Fall of the House of Steinberg" New York magazine, June 19, 2000, article by Johanna Berkman
• The Go-Go Years: The Drama and Crashing Finale of Wall Street's Bullish 60s by John Brooks (1999) ISBN 978-0471357551
• 740 Park: The Story of the World's Richest Apartment Building by Michael Gross, New York: Broadway Books, (2005), ISBN 978-0767917445