Richton International Corporation
Address:
767 Fifth Avenue
New York, New York 10153
U.S.A.
Telephone: (212) 751-1445
Fax: (212) 751-0397
http://www.richton.com
Statistics:
Public Company
Incorporated: 1913 as Cohn & Rosenberger
Employees: 700
Sales: $218.2 million (1999)
Stock Exchanges: American
Ticker Symbol: RHT
NAIC: 421830 Industrial Machinery and Equipment Wholesalers; 221310 Water Supply and Irrigation Systems
Key Dates:
1901: Emanuel Cohn and Carl Rosenberger open personal accessories shop in New York City.
1913: Cohn & Rosenberger is incorporated in New York State.
1943: Corporate name is changed to Coro, Inc.
1970: Coro, Inc. is purchased by investors from Kidde, Inc., and rechristened Richton International Corporation.
1989: Fred R. Sullivan takes over Richton.
1992: Richton is struggling; its major interests are sold off.
1993: Richton acquires Century Supply Corporation, entering the lawn irrigation and lawncare supplies business.
1995: Richton acquires CBE Technologies.
1999: Richton acquires Creative Business Concepts.
Company History:
The Richton International Corporation is a diversified services company that completely reinvented itself in the early 1990s. For decades the company was dedicated to the manufacture and distribution of costume jewelry and, later, fashion accessories such as ski wear, handbags, and fur coats. Richton's CEO, Fred R. Sullivan, sold off the company's interests in 1992 and turned to a completely different line of business a year later. Today, Richton's main enterprise is Century Supply, a wholesale distributor of irrigation products that serves irrigation and landscape contractors and golf courses, as well as the general public. In addition, Century sells outdoor lighting and decorative fountain equipment, accounting for seven percent of sales. Richton has also created a fast-growing technology group that provides computer network consulting, design, and installation; network management and support; technical-services outsourcing; hardware maintenance; and some equipment sales.
Richton's Connection to Jewelry Dates Back to 1901
If there are any founding fathers of Richton, given the company's radical shift in business, they would be Emanuel Cohn and Carl Rosenberger, who in 1902 opened a small shop on Broadway in New York City to sell personal accessories and inexpensive jewelry, some of which they made themselves. In 1913 they formed a corporation called Cohn & Rosenberger to manufacture costume jewelry. Originally marking their items with 'CR,' Cohn and Rosenberger switched in 1919 to the 'Coro' brand name, combining the first two letters of the partners' last names. Offering a large number of inexpensive items, Cohn and Rosenberger became a major manufacturer of costume jewelry by the mid-1920s, employing more than 2,000 people. Despite the onset of the Depression, in 1929 the firm opened a factory in Providence, Rhode Island, which at the time was a major center of the jewelry industry. After World War Two, the factory employed 3,500 and was the largest costume jewelry factory in the world. Whereas much of their merchandise could be found in five-and-dime stores, Cohn and Rosenberger's developed upscale lines of costume jewelry retailing at a much higher price point in specialty shops. The first, called Francois, was introduced in 1937 but was soon pulled from the market. Its successor, Corocraft, proved popular, and today its pieces are highly collectible.
In 1943 Cohn and Rosenberger, Inc. was reincorporated as Coro, Inc. A small operation opened in England in 1946, employing 18 people, and began full-scale manufacture in the 1950s. Coro created another superior line of costume jewelry to replace Corocraft called Vendome, which also began production in the 1950s, although it wouldn't gain popularity until the 1960s. At the height of its success, Coro had showrooms in New York, Chicago, Los Angeles, Dallas, San Francisco, Toronto, and Montreal.
Cohn & Rosenberger Becomes Richton International in 1969
In 1969 a group of investors led by Franc Mario Ricciardi, the president of Kidde, Inc., bought Coro and reincorporated the company in Delaware as Richton International. The CEO of Kidde at the time was Fred R. Sullivan, who would eventually join Richton's board. Ricciardi sought to aggressively expand beyond jewelry, bringing other fashion-related businesses into the Richton fold. In 1970 the company bought Oscar de la Renta International, Maximillian Fur, Coret Accessories, Bond Street Ltd., Ronay Handbags, Aspen Skiwear, Valerian S. Rybar, Inc., Dan Grossman Furs, and Chic-Maid. Two years later Richton acquired Don Rancho, Inc., which it renamed Richton Sportswear. After a period of rapid expansion, Richton then underwent a gradual contraction. In 1973 Richton sold off Dan Grossman Furs. A year later it sold Maximillian Fur and Oscar de la Renta. Aspen Skiwear and Richton Sportswear were sold off in 1983. The company tried to enter a different line of business in 1984 when it acquired a 23.4 percent interest in a nutrition company, Bio-Nutronics, Inc., but mostly Richton was shedding its interests. In 1987 certain assets and trademarks of the Bond Street division were sold for cash. The U.K. subsidiary of Richton was sold off in 1988.
Early in 1987, Kidde, still under the control of Sullivan, purchased more than 150,000 shares of Richton's stock, giving it 5.8 percent of the total. In a Securities and Exchange Commission filing, Kidde maintained that it did not have a plan formulated to seek to acquire control of Richton, yet added that its position 'should not be considered to be that of a passive investor.' Ricciardi insisted to the press that he knew of no plan for Kidde to gain control of the company. In November 1987 an investor group led by Robert P. Adler, holding 6.9 percent of Richton's stock, indicated that it might seek control of the company. After talks with Richton about a possible acquisition failed to produce an agreement, Adler's group did not foreclose on the possibility that it might make a tender offer or even initiate a proxy contest. In January 1988, Richton's directors approved a shareholder rights plan commonly used by companies to defend against a takeover, although they denied that the move was in response to any particular threat. As it turned out, Ricciardi would maintain control of Richton for the few months that remained in his life. He died in May 1989, and Sullivan assumed firm control over the company, buying 48 percent of Richton's stock. Another 35 percent would be owned by FRS Capital, in which his son owned a majority interest.
Richton's new CEO was 75 years old with an illustrious career already behind him. Sullivan went to work for the Monroe Calculating Machine Company in 1934 at the age of 20, making $14 per week as a clerk. He attended college at night for ten years, earning a B.A. from Rutgers and an M.B.A. from New York University. By 1953, at the age of 39, he become president and proved to be a shrewd judge of acquisition targets, transforming Monroe into a diversified business equipment company. When Monroe merged with aerospace-giant, Litton Industries, Sullivan served as senior vice-president with Litton for three years before leaving in 1964 to become president of Kidde, where he had been a director on its board.
At the time, Kidde was struggling with its primary business, home fire extinguishers. Flexing his muscles as a conglomerate builder, Sullivan reached out in any number of directions, buying dozens of companies in an effort to build up Kidde. He bought a New Jersey stationery firm, a Massachusetts gunsmith, a California crane company, a Detroit hospital company, and a Mississippi clock manufacturer. Eventually Kidde would boast around 100 separate operating units. In addition to a wide range of fire and security products, Kidde would sell such diverse products as golf clubs, airplane seats, toys, camping supplies, billiard equipment, archery equipment, Farberware appliances, hydraulic cranes, Jacuzzi whirlpool baths; products for offices; products for the automotive, defense, and trucking industries; as well as supplying Globe uniformed guards and temporary employees. In short, Sullivan moved with his sense of the country's economic and sociological trends, thinking in terms of customer markets instead of product lines, with the result that Kidde's stock rose steadily, peaking in the early 1980s, with sales in excess of $2 billion.
Kidde's fortunes, however, began to suffer in the mid-1980s, when an expansion into oil and gas exploration was hit hard by a collapse in energy prices that also crippled Grove Crane, the company's hydraulic crane operation. Later in 1985 Kidde sold off its building supply and banking equipment units for about $300 million. Holding only three percent of Kidde's stock, Sullivan was vulnerable to a possible takeover. As Sullivan neared the age of 73 in the summer of 1987, he announced that he was holding talks with two companies about selling off some or all of Kidde's assets, fueling speculation that he was getting ready to retire.
Distraught about the situation at Kidde, Sullivan reportedly confided in a friend, Edward R. Downe, Jr., a businessman and son-in-law of Henry Ford II, at Downe's Southampton estate during a weekend visit in June. Unwittingly, as far as the record indicates, Sullivan set off an insider stock-trading scheme that would surface a few years later, when he was running Richton, and rock New York high society. Also present at Downe's house was cosmetics magnate Martin Revson and David Salamone, a London-based partner of Downe, who then passed on the information about Kidde to Steven A. Greenberg, a New York financial public-relations executive. On Monday, Downe began to buy ten of thousands of Kidde stock through an offshore account, as did Revson, Salamone, Greenberg, and others they tipped off. In August Kidde announced that it was being acquired by a British firm, Hanson plc, for $1.7 billion. The price of Kidde's stock soared, and the inside traders quickly sold their interests, netting more than $3 million. Because the men bought the stocks just before a major corporate announcement, then sold them shortly thereafter, government regulators were alerted to possible illegal activity. Once the name of Downe's offshore entity was identified, it was only a matter of time before the scheme unraveled. For the next two years, however, the ring of insider traders would act on additional tips that they procured about possible acquisition targets.
In the meantime, Sullivan no longer ran Kidde. Following the death of Ricciardi two years later, he found himself well past typical retirement age yet with control of Richton International, a holding company that operated a struggling jewelry and fashion accessories business. For the next three years Sullivan took steps to reduce costs and improve sales but to little effect. In the summer of 1992, even though he had not been involved in any illicit stock trading, he found himself caught up in the embarrassment of an insider trading scandal that rivaled the cases of Ivan Boesky and Michael Milken, due more to the celebrity of the participants than the amount of money involved. Sullivan agreed to settle the SEC allegations by paying a penalty of $58,000 unconnected to the Kidde transaction. He had been accused of telling Downe about the sale of a subsidiary of Tyler Corporation, on whose board he sat. Sullivan, in a statement through his attorney, maintained that he settled the action to avoid the burden or expense or distraction of litigation, but did not admit or deny liability in the matter.
Richton Sells Off Coro Inc, in 1992
Five months later Sullivan sold Richton's operating subsidiary, Coro Inc., to a new company incorporated in Aruba called Coro International A.V.V. Thus, Richton had jettisoned its origins, the costume jewelry business created by Emanuel Cohen and Gerald Rosenberger at the beginning of the century. Sullivan retreated from public attention, and Richton essentially lay dormant for most of the following year. Then in October 1993, when Sullivan was 79 years old, Richton acquired Century Supply Corporation, a distributor of irrigation equipment and landscape supplies.
Century was founded in 1970, operating out of a single location in Berkley, Michigan. By the time Richton acquired the company, it was already a thriving regional business with 29 branches generating $43 million in annual sales. Under Richton's management, Century would accelerate its growth to become a leading distributor. As he had done so many times with Kidde, Sullivan successfully picked a line of business with high growth potential. Landscape irrigation was becoming an important part of the U.S. general construction industry, affiliated with residential and commercial properties, public parks, sports fields and stadiums, highway medians, and especially golf courses where new construction was steady, and old courses were looking to upgrade watering facilities. By 2000, it was estimated, more than $40 billion would be spent annually on landscape products and services.
Because poor weather could adversely affect business, expansion into new regions could mitigate the impact of climactic conditions on sales. Century began to purchase existing stores or open new branches at a steady pace. By the end of 1995 it had grown to 41 outlets, increased to 54 in 1996, 65 in 1997, 85 in 1998, and by the end of 1999 Century had 128 branches operating in six regions that, stretching from coast to coast, included 32 states, Canada, and the Caribbean basin.
In 1995 Richton moved into another promising area of business--computer network design, installation, and support--when for $5 million it bought CBE Technologies. Operating in the Massachusetts, Maine, and Rhode Island markets, CBE was a value-added reseller of Novell and Banyon Computer networking systems, and provided maintenance services for computer and business machines. Its customers included both Fortune 1000 corporations and mid-size companies that were either converting to more sophisticated technology or needed outside expertise to maintain their new equipment.
As it had done with Century, Richton began to expand the technology side of its business, both in locations and services offered. In 1996 CBE acquired three existing operations in Maine, New York, and Los Angeles. In February 1999 Richton acquired Creative Business Concepts (CBC), an Irvine, California, company that performed similar work as CBE, but served a new region, the southwest. The Costa Mesa CBE office was consolidated with CBC, with the combined unit working out of CBC's Irvine facilities. In October 1999 CBE acquired Corporate Access, Inc. of Andover, Massachusetts, a computer value-added reseller of computer hardware, software, and peripheral products. The two acquisitions in 1999 doubled the size of Richton's technology group, with sales increasing to $40 million.
Investors and independent observers did not overlook the success of Richton International in its new lines of endeavor. Richton ranked No. 4 in the second edition of Gene Walden's book, The 100 Best Stocks to Own for Under $25. In October 2000, Forbes listed Richton for the third straight year as one of the '200 Best Small Companies,' because of its 34 percent average sales growth and 33 percent average return on equity over the previous five years. Forbes also listed Richton as one of eleven small businesses to watch, praising Sullivan for his business sagacity. With its chief executive now 86 years of age, Richton International faced some uncertainty about its future leadership as it entered a new century. Yet, no matter who stood at the helm, whether Richton sold costume jewelry, ski wear, irrigation supplies, or computer services, the corporation seemed destined to carry on.
Principal Subsidiaries: Century Supply Corporation; CBE Technologies, Inc.; Creative Business Concepts, Inc.
Principal Competitors: Environmental Industries Inc.; PW Eagle, Inc.; Toro Company.
Further Reading:
Cera, Deanna Farneti, Jewels of Fantasy, New York: Abrams, 1992.
Glanston, Eileen, 'Eleven to Watch,' Forbes, October 30, 2000, pp. 194-218.
Lambert, Wade, Jonathan M. Moses, and Laurie P. Cohen, 'High-Society Figures Accused of Insider Trades,' Wall Street Journal, June 5, 1992, p. C1.
Miller, Michael W., 'Low-Key Tycoon Gets Wall Street Fever,' Wall Street Journal, July 14, 1987, p. 1.
Tolkien, Tracy, A Collector's Guide to Costume Jewelry, Ontario, Canada: Firefly Books, 1997.
Source: International Directory of Company Histories, Vol. 39. St. James Press, 2001.
