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The Once and Future C&F - The Go-Go Years
I n the 1981 annual report, a new section, “The Industry and Crum and Forster,” appeared. It reads like a sales pitch for C&F — and thus foreshadowed a possible sale. C&F was no stranger to M&A activity. While it was mostly as the acquirer, back in 1968 C&F’s board and stockholders approved a merger with Walter Kidde & Company, a producer of fire detection devices and fire extinguishers. The deal — maybe because it did not seem to make any sense — was not approved by Walter Kidde’s shareholders. Another M&A story from the time was that Peter Lewis (whose father started Progressive Insurance Company) visited Bobby Russell and told him that he could get the shareholders to agree to sell Progressive to C&F. One condition was that Lewis wanted to be named the next CEO of C&F. Bobby Russell declined the offer, and Lewis went on to do quite well at Progressive. By early 1982, C&F’s top line was shrinking at the same time that they strung together their two worst underwriting years ever. Even though Russell commented in the annual report that it was “mighty nice to have those big investment income dollars to fall back on,” the company had an unbooked mark-to-market bond overvaluation of $728 million against shareholders’ equity of only $923 million at the end of 1981. “In our great free enterprise system, a buyer’s market can’t last forever,” Russell wrote. “The seller must get his turn at bat. It just so happens that this time around, the buyer has been at bat much longer than usual due to unusually high interest rates, but: ‘This too shall pass’.” Russell seemed to know that he was going to need to do something soon. In the annual report, he had written that he was looking for a “suitor who’d allow us to remain pretty much in a stand-alone position and one with the same reputation for integrity we have.” And while Sears, American Can
and Transamerica all showed interest, it was Xerox that won the prize in the fall of 1982, with an incredible offer of $1.6 billion. Bobby Russell had made the biggest sale of his career. He had convinced Xerox to pay a premium for a company that was on the rocks. The annualized return on shareholders’ equity over Bobby Russell’s tenure was an impressive 17%. And now, to the surprise of many, C&F was part of a company that sold copiers. * * *
Heisman Trophy Award advertisement, 1983.
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