Tom Pritzker is back to building businesses.
The 63-year-old chairman of Hyatt Hotels Corp. spent much of the last decade shedding company after company, a gradual sell-off that settled a family dispute over money and control of an empire three generations in the making.
But on Monday, a new era began for Pritzker and his sister Gigi Pritzker. The Chicagoans announced they would buy steel mill servicing company TMS International Corp. for about $687 million in cash. Including debt, the deal is valued about $1 billion.
"It's the first time we've, in a sense, gone back to our roots," Tom Pritzker said in an interview at his office inside the Hyatt Center, which his family built and sold. "You could have seen us doing this before the family restructuring. This is exactly what we did before. This is what we want to do going forward."
Under the direction of Tom Pritzker, his cousin, Commerce Secretary Penny Pritzker, and relative Nick Pritzker, the family sold most of its assets and took others, such as Hyatt, public. That process mostly concluded in December 2011, leaving 11 Pritzker cousins, including Tom and Gigi, with an enormous amount of cash to spend or invest as they wished.
"Because of the restructuring, what happened is we now have far fewer businesses and far more capital to deploy," Tom Pritzker said. "So what I really want to do, and what (The Pritzker Organization) team is tasked to do, is find direct investments where we can have more companies that we can be engaged in trying to build."
"So you're on the hunt," I said.
"Yeah, and that's what our roots are, and what our skills are," Pritzker said.
TMS, controlled by Canada's Onex Group and based near Pittsburgh, helps steel mills buy and sell scrap and manage slag, a byproduct of steel production. The company operates 36 brokerage offices across five continents. Until Pritzker began vetting the company, he said he had never stepped foot in a steel mill.
"So we go off to the U.S. Steel plant in Gary, and the guy who sold me on the whole deal was named Spencer Hill," who leads TMS' operations there, Pritzker said. "We met with Spencer and his team, and I said: 'So, what do you do?' And Spencer said: 'My job is to over-serve my customers.' And honestly, that captures so much of how we think about running a company."
Pritzker said no sector or industry is off-limits for consideration. But he said he's looking to invest in "essential services to essential industries" in a "well-defined niche" and for the long term. His pitch is that unlike a private equity firm, he and his sister "are dealing with our own capital, so we can do whatever we want," including riding out volatility as steel production rises and falls.
Pritzker's net worth is $2.3 billion and his sister's $1.9 billion, according to Forbes. Recently, Pritzker has invested in a tech startup co-founded by his son, Jason Pritzker, called Yapmo, and in BDT Capital Partners, an investment firm founded by Byron Trott, a former Goldman Sachs investment banker.
The TMS investment is very much in the vein of Triton Container, a lessor of marine cargo containers, a majority interest in which the family sold to two private equity firms, and industrial conglomerate Marmon Group, which the family has gradually sold to Warren Buffett's Berkshire Hathaway.
"I wanted Marmon and our management to be in … a home that was similar to the home they had lived in for decades," Pritzker said. "So similarly, I think we can be on the other side of that same table. And we can be a really good home for companies that really want to think long term."
The offer of $17.50 per share from The Pritzker Organization, Tom and Gigi's investment arm, represents a premium of about 12 percent to TMS' Friday close of $15.57. As with most Pritzker interests, the new company will be indirectly owned by domestic trusts established for Tom and Gigi's benefit.
Gigi is a movie producer and the owner of OddLot Entertainment, a film production company, which is set to release its biggest film yet, "Ender's Game," based on the book by Orson Scott Card, on Nov. 1. She also has a theatrical production company, called Relevant Theatricals, which produces "Million Dollar Quartet," the long-running show at the Apollo Theater. Her husband, Michael Pucker, is a partner at Latham & Watkins, which advised The Pritzker Organization on the deal.
"Gigi looked at it," Tom Pritzker said of TMS. "Gigi's husband, Michael, is a lawyer at Latham, so he's intimately involved in this stuff."
But Tom Pritzker said that the decision came down to answering 'yes' to three questions: Is this something I can get passionate about? Is it something I want to spend my time on? And do I want to spend time with the people involved?
"The real decision shouldn't be made by the head, but by the heart," he said.