Ronald Perelman
USABiography of Ronald Perelman
Ronald Perelman, the American billionaire who dreamt of becoming a drummer, gained fame not through creating companies, but through his ability to extract maximum profit from their destruction. He built his multi-billion-dollar fortune almost from scratch by buying companies with borrowed money. Interestingly, his father was hesitant to entrust him with the family business, but musician Rod Stewart had no qualms about hiring him as a drummer for his concert.
Early Life and Career
Ronald Perelman was born in 1943 in Philadelphia to a business family. His father, Raymond Perelman, owned Belmont Industries, a metal processing company that also controlled about a dozen Philadelphia-based enterprises. His father saw Ronald as his successor and the future leader of the family business. From the age of 11, Ronald was expected to attend board meetings, and his father demanded competent answers from him, just like from other board members. When Ronald enrolled at the University of Pennsylvania, his future seemed certain. However, Ronald, who had grown to a height of 6'5" (195 cm) by then, loved playing the drums and saw himself as a musician rather than a businessman. He initially earned a Bachelor of Arts degree in music and later a Master of Business Administration. Ronald's preference for music over business did not sit well with his father, and eventually, his father chose his other son, Jeffrey, to lead the family business.
After working in his family's Belmont Industries until the age of 35, Ronald was left with nothing: no music career, no significant capital, and no influence. With nothing to lose, he moved to New York and decided to start over, working only for himself this time.
Building his Empire
Ronald had nothing but experience, some connections, and audacity. Unlike his father, Perelman did not intend to accumulate wealth gradually. He decided to take risks and borrowed $1.9 million to purchase a chain of jewelry stores in New York City. The uniqueness of this deal was that Ronald believed the jewelry chain was significantly undervalued, so he could sell it at a higher price. And he was right. Perelman soon sold the purchased stores for $15 million, making a profit of over $10 million after repaying the high-interest loan. This deal pleased Perelman so much that he decided to create a "money machine" based on leveraged buyouts. He started buying undervalued companies with borrowed funds and then sold off their most valuable divisions. The price of these "distressed" parts turned out to be higher than the cost of the acquired businesses, essentially allowing Perelman to make money out of thin air. He just needed to refine the process.
The appearance of a new financial instrument, known as junk bonds, became a real breakthrough for Perelman. These bonds were issued by almost anyone and were distinguished by insufficient collateral and, consequently, very high returns. The interest rates on these bonds in American dollars exceeded 20% per annum. In 1980, by issuing such bonds worth $35 million, Perelman acquired a major producer of licorice extract, MacAndrews & Forbes. By restructuring its business, Ronald made it the core of his future empire. To acquire various undervalued companies, Perelman spent about $360 million within five years after purchasing MacAndrews & Forbes, with $140 million spent on junk bonds. By 1985, Revlon, Consolidated Cigars, Movie Labs, Technicolor Inc., Video Corporation of America, and Pantry Pride had all passed through Perelman's hands. Having gained experience with smaller companies, Perelman decided to target one of the world's largest cosmetic companies – Revlon. He chose recently purchased grocery store chain Pantry Pride to launch his attack on the cosmetic giant. The joke was well-received, and when Perelman made an offer to purchase Revlon, the company's management did not take it seriously. Revlon's CEO, Michel Bergerac, even referred to Pantry Pride as "Panty Pride."
Perelman's strategy in attacking Revlon was to always offer more for the company's shares than anyone else. However, this required a tremendous amount of money. Essentially, it became a contest over who would run out of funds first – the raider or Revlon's management, which started a counter-buyback. Perelman's trick was that he borrowed against unsecured bonds and could offer more than anyone else.
When Perelman announced that he would automatically offer a quarter more for each share than any management proposal, Bergerac took it seriously. Perelman gained a controlling stake in Revlon when the share price doubled to $56.25. The acquisition of Revlon cost Perelman a total of $2 billion, with another $1 billion to be paid later. Shortly after the deal was completed, Perelman sold off all of Revlon's medical divisions for $1.4 billion, leaving the company with only its cosmetics production.
Personal Life and Success
Perelman's success can be attributed to his phenomenal selling ability. Even when Revlon faced financial troubles in the early 1990s and had to sell its division Max Factor to Procter & Gamble for $1.1 billion, Perelman had bought Max Factor for only $500 million a few years earlier. Even when Perelman failed to acquire a company, his opponents paid a high price, making his victory seem like a defeat for them. For example, during his attempt to take over Salomon Brothers, one of the largest investment companies in the U.S., in 1985, the company's management urgently needed $809 million to outbid Perelman's offer to purchase 14% of the company's shares. Salomon Brothers had only $109 million available. Ultimately, Warren Buffett, the second richest person in the world, came to Salomon Brothers' aid. In return, Buffett received convertible bonds from Salomon Brothers, which yielded a 9% annual return. The investment bank's losses from this deal alone amounted to about $126 million. But business success was never Perelman's ultimate goal in life. As another American billionaire, Donald Trump, once said, "During our meetings, Ron Perelman and I spend 95% of our time discussing women and only 5% talking about business." Perelman's subordinates are convinced that his main hobby is collecting women. For example, when the scandal broke out in the U.S. due to the intimate relationship between White House intern Monica Lewinsky and then-President Bill Clinton, Perelman hired Lewinsky immediately after her dismissal from the administration. Perhaps Perelman wanted to personally hear the details of the scandal from her.
It is not surprising that Perelman has gone through multiple divorces. His first wife, Faith Golding, left him as soon as he became wealthy. To prove marital infidelity, she hired a private detective, and in 1983, she presented the evidence in court, winning a settlement of $8 million. Two years later, Ronald married his second wife, journalist Claudia Cohen, a New York society columnist. Their union lasted for nine years, and in 1994, she also filed for divorce. By that time, Perelman had become significantly wealthier, and Claudia received $80 million in the settlement. Perelman's third wife was Patricia Duff, a Democratic Party official. The marriage lasted only two years, and millions of Americans eagerly followed the court battles for custody of their daughter, Caleigh. As part of the proceedings, Perelman presented the court with his daughter's food ration. The whole country was surprised to learn that the billionaire's daughter ate on a budget of $3 per day – the cost of her favorite foods, such as porridge, hot dogs, and chicken legs.
Perelman's fourth marriage, to Hollywood actress Ellen Barkin, has lasted for five years. His greatest achievement in this relationship was quitting his beloved cigars, which he had smoked incessantly since the age of 26, for the sake of his new wife and children. Ronald Perelman is estimated to be worth $4.9 billion by Forbes magazine, ranking him 103rd among the world's wealthiest people in 2005. In addition to Revlon, he controls companies such as Scientific Games and Panavision. In 2002, Perelman made a $6 billion sale of the small banking group Golden State Bancorp to one of the world's largest banks, Citigroup. It is unknown what the bankers were thinking, but the assets of Golden State are now valued at no more than $1.7 billion. Renowned musicians such as Rod Stewart and Jon Bon Jovi consider Perelman their friend. Stewart even helped Perelman fulfill his childhood dream by allowing him to play the drums at one of his concerts. According to the audience, Perelman did not ruin the overall performance. In return, Perelman shared his extensive experience with divorces with Stewart. "Ron called every day to check on how I was doing," Stewart says. Ronald Perelman's fourth marriage took place in June 2000. He married actress Ellen Barkin. The wedding ceremony and reception were brief, as Perelman had to appear in court the same day for divorce proceedings with his third wife, Patricia Duff. Perelman is known for his meticulousness when it comes to money. Recently, antique dealer De Vos and Girand from New York sued him for refusing to pay for several antique furniture items worth about $1 million. Perelman justified his actions by claiming that he had recently purchased an antique dining table from De Vos and Girand for $1 million, only to discover that it was a skillful forgery. According to his representatives, he and De Vos and Girand are now even. In May of this year, an American court found investment bank Morgan Stanley guilty of deceiving Ronald Perelman. In 1998, Perelman sold Coleman, a camping equipment manufacturer. Morgan Stanley acted as a consultant in the deal. Part of the payment was made in Sunbeam company shares, which were being purchased from Perelman by Coleman. However, three years later, Sunbeam went bankrupt, and it was later revealed that its financial statements had been falsified. As a result, Perelman lost $604 million, which he successfully demanded from the investment bank. In addition, the court awarded Perelman $850 million in punitive damages from Morgan Stanley.
