The Two Billion Cigar Baron
Altadis U.S.A. Chief Theo Folz celebrates a unique perspective developed over four decades in the cigar business.
From the Print Edition:
Tyson vs. King, Jan/Feb 04
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In 1988, Folz even bought Consolidated from Perelman, who was looking to exit the business. When Perelman couldn't find a buyer willing to take the entire company, Folz and his management group of Jim Colucci, George Gershel, Richard L. DiMeola, Gary Ellis and Denis McQuillen took an equity stake in a $138 million leveraged buyout from Perelman. Within two and a half months of the buyout, Folz had closed on three more deals: the pipe tobacco business of Century Tobacco, the premium Royal Jamaica brand and the U.S. distribution rights to Mexico's largest cigar brand, Te-Amo. He also moved the headquarters from New York City to Fort Lauderdale, saving $2 million a year because of cheaper office space and better productivity.
Buyout firms acquire companies to sell them -- that's how they make a profit -- so by late 1992 Folz was again making the rounds, looking for a new buyer. He was scheduled for a relationship-building meeting with a buyer in New York, when he found two hours of extra time in his schedule. He paid Perelman a visit. They chatted and things went well, and then Folz left for his meeting, which didn't go well. By the time he got back to his hotel, there were messages to call Perelman.
"Ronald made up his mind to buy the company in two hours and 14 minutes," says Folz. The deal was closed in March 1993, with Perelman reacquiring Consolidated for $188 million. "Theo did a fabulous job in the two years that he ran it for the LBO fund, and it was worth more when we bought it back than it was when we sold it," said Perelman in a 1995 Cigar Aficionado interview.
Perelman's timing was fortuitous: cigar sales were just beginning to gather steam. Consolidated's revenues increased from $125.9 million in 1993 to $158.2 million in 1995, with net income skyrocketing from $2.8 million to $13.9 million. By 1995, Consolidated was making a billion cigars a year, 44 million of them premium.
In 1996, Perelman moved to take Consolidated public. It was up to Folz and his chief financial officer Gary Ellis to hit the road and sell the company to investors. "It was the most exciting experience of my life. We left Fort Lauderdale at 3 o'clock on a Sunday afternoon on one of Mr. Perelman's Gulfstream jets," says Folz. "Our goal was to sell 5 million shares of stock with an indicated price of $17 to $19 a share. At the end of our road show, we had orders for 55 million shares. And we raised the price to $23."
The buying and selling of Consolidated Cigar would prove to be a seemingly never-ending experience for Folz. In 1999, Perelman, who controlled the company with a 67 percent equity interest, sold it to French tobacco giant SEITA for $733 million. SEITA would later merge with Spain's Tabacalera S.A., creating Altadis S.A., and Consolidated was renamed Altadis U.S.A.
Folz was heavily involved in each step of the process, meeting with officials from SEITA, as well as rival bidder Swedish Match AB. The two European companies had equal bids for Consolidated, but in the end Folz chose SEITA, feeling it made better business sense.
Before he worked on the SEITA deal, however, Folz would find himself managing Consolidated through the cigar boom, and would later take a much greater role in the premium cigar business.
THIRTY-SEVEN MILLION BACK ORDERS
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