Corporations: A Prize for Agility

In the struggle by Investors Overseas Services to shore up its finances, the most puzzling phenomenon has been the proffered help of a little-known New Jersey manufacturer, International Controls Corp. It seemed odd that I.C.C. should be anxious to lend up to $15 million to the troubled mutual-fund complex despite opposition by I.O.S.'s temporarily ousted founder, Bernie Cornfeld. After all, European bankers from the Rothschilds on down had sidestepped urgent invitations to come to the rescue. Yet this week I.C.C. President Robert L. Vesco is due in Geneva to sign the loan papers. "Our motive is simple," he says. "We love money."

In essence, the 34-year-old Vesco will be making a hefty bet on an I.O.S. comeback. In return for the loan, which will pay an initial 10% a year interest, I.C.C. will get warrants to buy up to 7,500,000 shares of stock in parent I.O.S. Ltd. at $2 a share. Last week the price of those shares rallied from $2.22 to $2.82 in London. I.C.C. stands to snare a profit of $7,500,000 for every $1 that I.O.S. stock rises above $2. Vesco in addition will have what he calls "veto power over I.O.S.'s checkbook"—two nominees on a five-man finance committee and the right to appoint a third who is also agreeable to I.O.S.

Fast Footwork. The natty Vesco has already earned a reputation for fast financial footwork. The Detroit-born son of an autoworker, he left school at 17, learned management techniques on the job at Packard, Bohm Aluminum and Reynolds Metals. He went into business on his own at 24, arranging contracts and financing for deals to buy and sell small companies; sometimes he accepted stock as a fee. Partly through this method, Vesco in 1965 combined two tiny valve and control manufacturers to form International Controls, with 20 employees and sales of $1,050,000.

Thanks to mergers, International Controls has since swelled into a mini-conglomerate, with sales of $100 million, 4,000 employees and 31 factories that make aircraft parts, bomb casings, radar components and dozens of other items. "We've built ourselves on financial agility," boasts Vesco. He persuaded Hale Bros. Associates, a San Francisco investment firm that controls the Broadway-Hale department store chain, to become an early backer by buying $80,000 of stock. I.C.C. was one of the first U.S. firms to tap the hoard of Eurodollars, raising $25 million through an issue of debentures in 1968.

Laundering the Deal. Some of Vesco's acquisitions have been painful. The top officers of Electronic Specialty, a West Coast maker of aircraft parts, bitterly fought Vesco's successful takeover attempt. Later they sued Vesco on charges of misrepresenting his offer. Vesco was exonerated on appeal. Both sides sued on similar grounds during I.C.C.'s takeover of Intercontinental Industries, a Dallas electronics firm. Vesco in 1968 paid $1,500,000 to buy Golden West Airlines, a regional carrier, only to sell it a year later for a mere $100,000 after suffering a $1,800,000 operating loss. Partly because of such mishaps, the price of I.C.C. shares on the American Stock Exchange has dropped from a 1968 peak of 50 7/8 to 10¼ last week.