American Can Looks To 1987 As Year of New Business, New Management
Jan. 27, 1987
GREENWICH, Conn. (AP) _ American Can Co. announced Tuesday that Gerald Tsai Jr., the current vice chairman and aggressive former stock analyst who helped steer the company into financial services, will succeed William S. Woodside as chairman.
Tsai's appointment and plans to rename the 86-year-old company to reflect its relatively new ventures mark American Can's bold step into the 1990s.
''I don't know what we'll look like in 10 years, but we'll be substantially bigger and substantially more profitable,'' Tsai said in an interview Monday. ''And our stockholders will be rewarded at the same time - that's our job.''
The company announced a redirection in 1981 when it said it would divest 25 percent of its assets.
A year later, it acquired Tsai's Associated Madison, an insurance firm, for $127 million and Tsai took charge of building American Can's financial services sector. American Can also acquired Transport Life Insurance for $152 million and PennCorp Financial for $295 million the same year.
In 1983, Tsai was named vice chairman, and last year, he was named chief executive officer. Meanwhile the company has made several other acquisitions - including American Capital, Berg Enterprises, and a major interest in Jeffries Group, a securities broker.
The company has sunk more than $1 billion into the financial services industry since 1982. It had $4.2 billion in revenues in 1985.
Last July, the company announced it will sell its packaging operations to Triangle Industries for about $570 million, completing its transformation.
Now American Can derives 70 percent of its profits from financial services and 30 percent from the specialty retailing businesses, such as Fingerhut Cos., a direct marketing company, and the Musicland Group.
''It was important for them to get out of that (packaging) for a number of reasons - it's a break-even, cyclical, highly competitive and capital- intensive business,'' said W. Dudley Heer, vice president of Duff & Phelps in Chicago. ''They were going nowhere in a hurry. It's a lousy business.''
Besides changing the management team, the company will take on a new name. It is now before the board and the company's lawyers for approval. An announcement is expected next month.
''When I started, we made nothing but cans,'' said Woodside, who retires Jan. 31 at age 65. ''We diversified in the '50s and included some paper business and some plastics, but our most dramatic change took place in 1982 when we solds all our old business and have all new. None of our businesses today were a part of us 10 years ago.''
Woodside, who said he plans to spend his retirement on various community boards and as chairman of American Can's executive committee, predicts the company in the next decade will be in two or three new major businesses, be extremely profitable, and ''remain growth-oriented.''
Neither Woodside nor Tsai would give any clues as to what new businesses they would like to venture into.
''We don't want to be in capital-intensive business, such as steel, autos or chemicals,'' Tsai said. ''In order to grow substantially, the bulk (of growth) will have to come through acqusitions.
''Internally, you can only grow 15 to 20 percent a year, and if you want to triple your growth, acqusitions will have to play a major role.''
Cornelius Thornton, a senior securities analyst with First Boston in New York, said Tsai's actions on behalf of American Can have been the ''apex of change.'' American Can on Tuesday also announced a 2-for-1 stock split, which Thornton said means ''they're coming in in a festive manner.''
''Tsai is the one who has been the band leader in this show,'' Thornton said. ''He's more of a deal maker than a hands-on operations man.
''The company has woven the fabric for what it will be. It'll be bigger, not different,'' Thornton said.