The Indianapolis Star Daniel Lee Column
By Daniel Lee, The Indianapolis Star
Oct. 31–Wealthy California financier Richard Blum’s passions include mountain climbing and Tibetan Buddhism.
In fact, Blum — husband of U.S. Sen. Dianne Feinstein — once attempted to climb the Tibetan side of Mount Everest with Sir Edmund Hillary.
But Blum, 70, is serious about business, too.
He built his career with shrewd investments, researching to find undervalued or troubled companies with potential for profits. That strategy led his San Francisco investment firm to Central Indiana.
Blum Capital Partners keeps gobbling up huge chunks of stock in ITT Educational Services Inc., a for-profit education company based in Carmel.
The firm started buying ITT shares in 2004 after the stock price plummeted on news that federal agents raided the company’s headquarters and campuses.
The firm now holds almost 6.9 million shares, according to filings with the Securities and Exchange Commission. That represents nearly a 15 percent stake in the company, worth about $374 million based on Friday’s closing stock price of $55.37, a 52-week high.
Blum’s investment provides ITT a backer with deep pockets and vast experience advising companies.
Richard Blum, although personally leading the ITT investment, is the firm’s chairman and the architect of its strategy.
He has a long track record of success. As a young man, he led a team that bought Ringling Brothers and Barnum & Bailey Circus for $8 million, selling it several years later to Mattel Inc. for a reported $47 million. He then created his own investment firm in 1975.
These days, Blum’s firm typically wants to become the largest single stakeholder in each of its portfolio companies to get a “seat at the table ” to start working with management to improve the business.
Blum’s firm declined to comment on ITT, but Blum’s tactics are described on its Web site.
When it invests in a company, Blum “expects to work with management” on financial and business strategies. It may seek a board seat or recommend a company use certain consultants to improve its performance. Blum usually invests with a company for one to five years.
ITT downplayed Blum’s day-to-day role. “We are not aware of any interest in their having a seat on the board or in actively managing,” ITT spokeswoman Nancy Brown said.
Blum’s buying spree began Feb. 26, 2004, the day after federal agents raided ITT facilities, sending the company’s stock price tumbling. Blum paid $35 a share or less for much of its early holdings.
ITT’s outlook has improved much since then.
The U.S. Department of Justice in June ended a widespread investigation into the company’s record-keeping practices after finding no evidence of wrongdoing. The SEC later dropped a related inquiry. This month, ITT paid $750,000 to settle a similar probe by the California attorney general’s office.
It looks as if Blum for now wants to buy and hold ITT, said Tim Beyers, contributor to financial Web site Motley Fool.
“They see a valuation case that is probably very attractive to them.”
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