Mitt Romney's Bain Capital Investments: 5 of the Best
Mitt Romney has yet to make an impression on the Oval Office's upholstery, but he's left a mark on your pizza, office and bed.
While much of Romney's presidential campaign will focus on his executive experience in the Massachusetts statehouse, the former Bay State governor and GOP presidential hopeful's calls as co-founder of Bain Capital have had a much bigger impact on the American consumer so far.
The venture-capital-turned-leveraged-buyout firm helped fund Romney's personal fortune, believed to be between $190 million and $300 million, and provided $45 million of the $110 million he spent on his unsuccessful 2008 presidential run.
Sometimes the calls didn't quite work out, as was the case when Bain Capital and then-aspiring Senate candidate Romney bought American Pad & Paper Co. for $5 million in 1992. Bain charged Ampad advisory fees, used it to buy a few other office-supply makers and ran the company's debt from $11 million in 1993 to nearly $400 million in 1999.
Meanwhile, it acquired an Ampad plant in Marion, Ill., in 1994 and shuttered the 200-worker facility the next year after workers held a strike over layoffs and pay cuts.
The labor strife was used against Romney by Sen. Edward M. Kennedy in the 1994 race for Kennedy's Senate seat and, though Romney gave Kennedy the toughest contest of his career, Romney lost by 18 points.
The subsequent closing of a 185-worker Ampad plant in Buffalo, N.Y., despite a $50 million public stock offering only three years earlier (and Ampad's ensuing bankruptcy in 2000 and liquidation in 2001) made that transaction one of Romney's few regrets during the Bain years and the kind of thing he told The New York Times he would "be more sensitive" about if he could do it over again — despite helping himself and Bain investors pocket $100 million from the deal.
"When Bain bought film studio Artisan Entertainment, Romney refused to involve himself in the deal because the studio had produced R-rated films including Quentin Tarantino's 'Reservoir Dogs.'""
When Romney's Bain decisions worked out, however, they did so in a big way. Back in 1986, the co-founder of a little office supply store in Boston's Brighton neighborhood went to Romney and convinced him there was a lot of money to be made selling desk chairs, copier paper and toner. Bain invested $2 million in the store that later became the Staples chain and got $13 million in return for its troubles. Today, Staples has an $11.8 billion market cap and looks like the best investment anyone's ever made in printer ink.
TheStreet took a look at Bain Capital's Romney-era investments and came up with five that had the biggest impact on American consumers. They may not say much about Romney as a candidate, but they're big, logo-laden signs of who he is as an investor and how he connects with the American buying public:
As mentioned earlier, Romney and Bain invested in Staples in Bain's heady early days when venture capital was its weapon of choice and leveraged acquisitions weren't anybody's idea of a good time. It didn't make that investment any less wise or the moves that followed any less indicative of Staples' influence on future endeavors.
Romney and Bain landed this first big success when Staples co-founder Thomas Stemberg bent Romney's ear a quarter-century ago and told him about the growth potential for office supplies.
Stemberg himself was so convinced of it that he and partner Leo Kahn — who each ran grocery chains in the Boston area and had been battling each other for the cheapest price on a Thanksgiving turkey just a year before — focused their attention on dropping the price of $3 pack of pens that sold at wholesale for 10% of that cost.
Bain and Romney saw a $13 million return on their $2 million investment and last year saw Staples bring in $24.5 billion in sales and employ roughly 90,000 people worldwide. That initial gain was enough to bring Bain and Romney back to office supplies again when they leveraged the Ampad buyout in 1992.
The result didn't turn out nearly so well for Ampad or its employees, but Bain's multimillion-dollar windfall from the deal displayed Romney's penchant for finding growth potential and capitalizing on it.
The Sports Authority
When one good idea pays off, why not do it again?
Just as there was little call for a local stationery store the size of a hangar when Staples opened in 1986, sports stores weren't much beyond mom-and-pop stores and regional mall- and strip-mall-based chains in 1987, when former Herman's World of Sporting Goods CEO Jack Smith pitched Romney, Bain and several other backers on the idea of a sporting-goods mega store roughly the size of a small arena.
He'd failed at it with Herman's, but Bain and other venture capital partners saw a big box full of potential in Smith's idea and helped him open nine such stores in six states by 1990.
Unfortunately for Smith, he hadn't made a profit off any of them at the time. Fortunately for Romney and Bain, the folks at Kmart didn't care and bought the chain for $75 million.
Though Sports Authority would eventually grow to more than 460 stores in 45 states and a number of licensed stores in Japan, the investment would never work out for Kmart, which sold off Sports Authority in 1994 after closing several of its own stores. Within eight years, Kmart would be bankrupt and Sports Authority would be thriving.