The late Donald Rumsfeld was remembered this week for his ups and downs in world politics. Their similar history in leveraged buyouts is less well known.
In 1990, the late private-equity tycoon Ted Forstman saw Rumsfeld, who sat on the advisory board of his firm Forstman Little, as a big name that was at the time America’s largest cable TV set-top, his company General Instruments. Could help in the IPO market for the box maker.
This is despite the former defense secretary, who died this week at age 88, with no prior experience in cable or telecommunications, although he previously headed Metamucil’s creator GD Searle.
After taking the helm, Rumsfeld moved General Instrument’s headquarters from New York to his hometown of Chicago, removing two-thirds of the New York office. Overall, they cut $65 million in overhead, according to the 2009 book “America’s Buyout” By Josh Kosman (yes – this column has the same author you are reading).
In 1992, Rumsfeld clashed with Forstmann, who wanted an IPO. Rumsfeld was concerned about the loss, which remained despite his deductions.
“I think it was very clear that Forstmann felt that Rumsfeld just wasn’t playing the game he wanted to play to maximize his investment,” former GI exec Hal Chrisberg said in the book.
Still, he talked to analysts about the earnings growth Rumsfeld did so ruthlessly. The IPO was a minor failure, with shares closing 14 percent below expectations on the first day of trading.
Meanwhile, GI was working on a way to bring more channels to the set-top box. This convinced its biggest customer, John Malone, that it could increase the capacity to 85 to 500 channels.
Malone’s TCI announced in December 1992 that it would sell one million boxes within two years and signed a letter of intent to purchase them.
After a year or two it was becoming clear that GI was not going to give the date of its delivery.
In 1993, according to one source, Forstmann eventually ousted Rumsfeld after, among other things, annoyed with him for spending too much time analyzing the Gulf War on Acesparks rather than running the business.
“Don was hired to clean up the company, and he did, and when that was done, I thought it was time for him to move on, and he did,” Forstmann’s spokesperson said in 2009. Said through a spokesperson.
Rumsfeld was well paid for his time, with compensation that included $34 million worth of stock.