THE BOSTON GLOBE - TUESDAY, MARCH 22, 1994

Blue Chip Investors
Former Fortune 500 CEOs join forces to invest in small companies

By Kimberly Blanton, Globe Staff

PEABODY - Repeated calls and letters, even pleading voice mail messages, could not get the tiny computer-packaging maker in the door at a couple of potential Fortune 500 customers.

So Universal Protective Packaging turned to an old trick: connections. Universal investor Charles E. Exley Jr., the retired chief executive of NCR Corp., called friends of his former company. Another Universal investor, E. Paul Casey, former chief executive of Ex-Cell-O Corp., contacted Northern Telecom Ltd.'s chief executive.

Magically, doors opened. Northern Telecom's purchasing executives met with Universal and agreed to place a trial order for plastic clamshell packaging for computer circuit boards. Universal didn't make a sale after meeting with NCR executives, but hopes the company one day becomes a customer.

Universal's president, Rodney Rumberger, knows NCR and Northern Telecom won't buy if they don't like his product. But the nudge from some of Universal's investors didn't hurt. "The powerful connections they have throughout the business world … go a long way" toward helping the $7-million-a-year Pennsylvania company, he says.

Who says all chief executives retire to play golf?

NCR's Exley and Ex-Cell-O's Casey are two of the 30 investors in Metapoint Partners, a Peabody-based investment partnership. Most of the partners are current and former chief executives of some of the nation's biggest companies, who have pooled part of their retirement pay to invest in small firms like Universal. Casey, Metapoint's creator, assembled the investors. His staff scours the country for companies. Metapoint buys them, fixes them up and, usually, sells at a profit.

Some of the Metapoint investors are former chief executives who were forced to retire when their companies were taken over in the turbulent 1980s. But if those executives were reluctant to give up their corner offices, few likely have regrets now. From July 1988, when Metapoint's first investment fund was started, through the end of February, it has earned a sweet 47 percent average annual return on an initial investment of $11 million.

"It's difficult to get 47 percent returns in any market," said Steven Galante, publisher of The Private Equity Analyst, a Wellesley investment newsletter. "That kind of performance is terrific."

Metapoint's investment strategy is hardly unique. But Galante says Metapoint has an edge in the competitive buyout business: Its investors bring years of experience at the helm of mostly Rust Belt industrial companies to the aid of manufacturers with sales of $30 million or less.

"That's the most important role these guys play. It's not a big deal to call a CEO - they do it all the time," said Keith Shaughnessy, the former head of Bank of Boston Corp.'s acquisitions division, who was hired by Casey as Metapoint's president.

Metapoint's investor roster is, in a word, heavy-hitting. It includes Harold "Red" Poling, former CEO (1990-1993) of Ford Motor Co.; Joseph D. Williams, former CEO (1985-1992) of Warner-Lambert Co.; Peter A Brooke, founder of T.A. Associates (1968-1987) and a pioneer of Boston's venture capital industry; Thomas A. Holmes, former CEO (1981-1988) of Ingersoll-Rand Co.; Unitrode Corp.'s current CEO, Robert Gable; and Buffalo Bills owner Ralph Wilson, Jr., who also is CEO of his own concrete paving and television company.

Some were forced out after their companies were devoured in the 1980s takeover frenzy. Metapoint partner Whitney Stevens, former CEO (1980-1988) of J.P. Stevens & Co., left after the company that was owned by his family for five generations was bought in a hostile takeover by Westpoint-Pepperell Co. Casey formed Metapoint in 1987, a year after Textron Inc. acquired Ex-Cell-O in a hostile takeover and gave him a desk and a title - but no real responsibility. Exley left NCR when the company was acquired by AT&T for 7.5 billion in 1991.

With an average age of 65, Metapoint's partners don't see themselves as long-term investors. Rather, they are in the investment game to make money - quickly. Small private companies, they say, can be turned around faster than the publicly owned behemoths they wrestled with in their prime.

Metapoint investors "are coming into this with a shorter horizon," said Casey. "A smaller company is easier to make an impact on in a short time."

But the retired executives also like the idea of contributing to small businesses, which may one day become Fortune 500 companies themselves. With a single phone call, they can find the country's leading authority on a manufacturing process, arrange a meeting with a potential customer, or dispense advice to managers. Just as important, partners have steered Metapoint clear of bad investments.

"It sounds corny, but you can grow a company, help by creating jobs, helping the community," said Metapoint investor Burnell Roberts, the former chief executive (1982-1992) of Mead Corp., the paper company.

"To the extent they benefit, we can benefit more," said Poling, who became Metapoint's newest investor when he retired last year after 42 years with Ford.

Even with its impressive investors, Metapoint makes mistakes.

Weatherguard Ornamental Iron had to be liquidated after its biggest customer, Sears Roebuck & Co., suddenly abandoned the home improvement business. Casey says Metapoint, mistakenly, agreed to buy Weatherguard after being "mesmerized" by its chief executive. Metapoint lost its entire $2 million investment in Weatherguard.

"That's one we'd just as soon forget," Casey said. But Weatherguard held a valuable lesson: "None of the partners had any experience" in the door business, he said.

Still, the sour deal was the exception. Encouraged by the generous return on the original Metapoint fund, all 16 of the fund's early investors agreed to invest in a second fund, which raised $21 million and recently made its first acquisition, Julius Koch USA Inc., a New Bedford maker of the cords used in window shades.

One of Metapoint's most successful deals was Gimpel Corp., a maker of highly engineered valves used in steam turbines.

Key in that deal was Metapoint partner Holmes, the former chief executive of Ingersoll-Rand. Holmes suggested that a former colleague, Steven Sandy, who ran Ingersoll-Rand's pump division and was leaving his job, to run a Metapoint company. Metapoint found Gimpel in Langhorn, Pa., which makes a specialty valve with a 90 percent market share.

Sandy dazzled the Gimpels, whose family had owned the business for 72 years. "Steve Sandy knew their customers on a first-name basis," Shaughnessy, the Metapoint president, said. "The owner said, 'This is the kind of guy I want to sell to.' "

After Metapoint turned Gimpel around, the company was sold at a 62 percent annual return to investors.

Under Metapoint, sales at Fluidrive Inc. are expected to reach $25 million this year, nearly doubling since the executives bought the Indiana-based maker of hydraulic axles for heavy equipment and vehicles in October 1991.

Metapoint installed David Dull, who was then running Fluidrive's sales and engineering groups, to head the company. Metapoint then gave Dull free rein to try new ideas and cut the red tape and political infighting that had been disrupting the business.

Metapoint encouraged Fluidrive to go after customers in the growing motor-home business, with advice offered by Metapoint investor Martin Walker, former head (1972-1986) of Rockwell International Corp.'s automotive division.

Dull credits Casey for coaching him on how to win Winnebago as a customer. Casey, Dull said, explained he had to do "more than just talking about how great your products are to the engineering people. You've got to try to go in at the senior level." The strategy worked: Fluidrive now sells suspension systems to Winnebago.

Of the eight companies Metapoint has acquired, two have caused problems, Weatherguard and Colonial Mills, a Pawtucket maker of braided rugs.

But, unlike Weatherguard, Colonial was turned around with help from Stevens, who took advantage of his experience at J.P. Stevens, one of the country's premier textiles companies.

Soon after Metapoint acquired Colonial in 1990, the recession hit and sales sagged. Metapoint encouraged Colonial to develop a new rug and update its styles and colors.

Steven was involved in the Colonial deal from the start. When Colonial had a credit problem with a big supplier, DuPont, Stevens said he called the chief executive to clear it up. He also contacted two prospective Colonial customers, Laura Ashley and Ralph Lauren.

"It's been great fun," says Stevens.

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