Entrepreneurs: The Tribulations of Saul

Saul Steinberg is a 30-year-old wonder who founded Leasco, a pioneer computer-leasing company, two years after graduating from the Wharton School of Finance and Commerce in 1959. Since then, by extending his successful leasing activities into other areas and adding insurance and data-processing operations, he has built the company into a business with assets of $400 million. When Steinberg, a tall and portly man, announced last summer that he intended to make a $60 million bid for the London scientific publishing house of Pergamon Press Ltd., Britons viewed him as a brash Yankee millionaire—one of those action sculptors who hammer out free-form conglomerates. This impression was fortified by Leasco’s on-again, off-again tactics. After withdrawing the offer in a falling-out with Pergamon’s chairman, Robert Maxwell, with whom he had originally got on well, Steinberg lined up enough support from British institutional investors to oust Maxwell at a stormy meeting two weeks ago.

Steinberg wanted Pergamon for the 135 scientific journals that it publishes —solid assets for a Leasco data bank. “Over the years you build up an immense file of information,” he says. “We can provide instant retrieval for that information.” Presumably, Steinberg would like to sell this information directly to companies, governments and educational institutions in the U.S. and abroad.

During the takeover struggle, Steinberg remained in the background while the British Rothschilds, who acted as Leasco’s advisers in the bid, rounded up the crucial 15% of Pergamon’s stock that is controlled by staid bankers in London’s City. That stock, added to Leasco’s 38% holding in the company, put Steinberg over the top.

Help from Raquel. It would please Steinberg if the U.S. financial community would also accept him as the sobersided entrepreneur that he believes himself to be. He started his company with $25,000 borrowed from his father, bought IBM computers and leased them to users at rates below IBM’s own rental charges. He could undercut IBM’s prices because he was willing to risk depreciating the computers over eight instead of four years, gambling successfully on a longer useful life of the equipment. From this base he moved into related fields, buying a container-leasing company and developing software, data and time-sharing operations.

In 1968, Leasco acquired Philadelphia’s Reliance Insurance Co., an old-line company with useful cash assets. This deal, accomplished through a stock swap, sparked an inquiry by Brooklyn Democratic Congressman Emanuel Celler, who has serious doubts about conglomerates’ taking over insurance companies and using their funds for expansion. Among the details turned up in hearings last week was that, in preparing the bid, Leasco executives used the code name “Raquel” for Reliance to conceal the identity of the target from even Leasco’s own employees.

Chemical Reaction. Last February Steinberg stalked bigger game: Manhattan’s Chemical Bank, whose assets of $9 billion make it the sixth biggest bank in the U.S. When word got around that Saul was trying to do a David, the reaction of many financiers was chemical. The Waspish commercial banking Establishment did not want a Manhattan bank to be taken over by a young upstart, especially one with a name like Steinberg. Bank trust departments dumped Leasco shares, pushing the price down by one-third, and Steinberg was forced to retreat. Noting the eagerness with which major banks, through one-bank holding companies, have been seeking to enter Leasco’s field of leasing and data operations, Steinberg still believes that there is a natural link between Leasco and banking. But he now says, “I would never want to get so heavily involved with someone who was not enthusiastic.”

Leasco is no longer a one-man band. Steinberg has brought in talent at the top, including a new president, Frank McCracken, 50, who was lured away from a 23-year career at IBM. He has also hired Thomas C. Sorensen (brother of Ted) to modulate Leasco’s publicity into a lower, less personal key. That may take some doing. Steinberg has been regarded as almost wholly responsible for the ups and downs of a company whose stock, despite a clobbering this year, has multiplied 17 times over since Leasco went public in 1965.