August 18, 2022

DealBook: Natural Gas Bidding War Puts Spotlight on a Billionaire

George L. Lindemann, Southern Union's chief executive, who has quietly amassed a fortune in various businesses.Southern UnionGeorge L. Lindemann, Southern Union’s chief executive, who has quietly amassed a fortune in various businesses over decades.

A multibillion-dollar takeover battle broke out last week over a Houston company that owns 20,000 miles of natural gas pipelines running from the southeastern tip of Florida to the Oklahoma Panhandle.

The man at the center of the fight is a New York billionaire who runs the energy business from offices on the top floor of the General Motors Building on Fifth Avenue overlooking Central Park.

George L. Lindemann has quietly amassed a fortune over a five-decade career of buying and selling disparate businesses, like contact lenses and cellphone licenses. Now, the 74-year-old investor has been thrust into the middle of a tug-of-war over Southern Union, the natural gas company he has controlled since 1990.

“Unlike the high-profile hedge fund and private equity guys, he’s more of a throwback, an old-school, publicity-averse deal maker,” said Peter Newcomb, a longtime editor of the Forbes 400, the annual list of the wealthiest Americans, on which Mr. Lindemann routinely appears. “Despite his extraordinary success he tends to fly beneath the radar.”

That has been, in part, because operating a pipeline has historically been a sleepy affair. But in recent years natural gas has experienced a boom as new exploration fields have been discovered in places like the Eagle Ford Shale in Texas and the Haynesville Shale near Shreveport, La.

The potential new energy sources have created a sharp demand for pipeline companies like Southern Union, which transports natural gas to consumers in populous areas like Florida and Illinois.

Energy Transfer Equity, a large pipeline operator based in Dallas, announced two weeks ago that it had reached a deal to buy Southern Union in a complex all-stock transaction worth $4.2 billion, or $33 a share.

Days later, a rival, the Williams Companies, countered with a hostile bid, offering $4.9 billion, or $39 a share in cash. A special committee of the Southern Union board is now weighing the two offers.

Whichever side wins, a sale of Southern Union would be the capstone of Mr. Lindemann’s career. At $39 a share, his stake would be worth about $320 million.

The deal would highlight what admirers say is Mr. Lindemann’s uncanny nose for spotting business trends. Over the years, he has moved deftly among varied industries, buying assets on the cheap, then selling them for rich profits.

The son of a self-made cosmetics mogul, Mr. Lindemann joined his father’s business in 1957 after graduating from the Wharton School at the University of Pennsylvania. Several years later, he led a pharmaceutical company that developed the first permanent-wear soft contact lens. In 1971, he sold that business, Permalens, for $75 million to Cooper Labs.

Mr. Lindemann then shifted into cable television, building up Vision Cable throughout the 1970s and selling it to Advance/Newhouse in 1982 for about $260 million. In the early 1980s, he pivoted into cellular telephones, snapping up wireless licenses around the country. Bell Atlantic bought his company, Metro Mobile CTS, for $1.65 billion in 1992.

The sale allowed Mr. Lindemann to focus on Southern Union, a small, struggling natural gas pipeline company that he had acquired through Metro Mobile in 1990 for $125 million. The company has aggressively expanded through acquisitions in the past decade, acquiring pipeline assets from the bankrupt Enron and a large natural gas business from the Bass family of Fort Worth. Today, Southern Union’s market capitalization is about $5 billion.

Though rarely appearing in the business press, Mr. Lindemann cuts a prominent figure in the haut monde circles of the Upper East Side, Greenwich, Conn., and Palm Beach, Fla. His wife, Dr. Frayda B. Lindemann, serves as vice president on the Metropolitan Opera’s board. For decades, the couple has sponsored an artist development program at the opera house that provides training to promising young singers.

In 2008, Mr. Lindemann sold his oceanfront Palm Beach mansion for $68.5 million, one of the largest private-home sales recorded on the wealthy island. A few months later, he bought a new house several miles up the road for $23.5 million. A passionate yachtsman, he also owns a 180-foot schooner, Adela, which has won international sailing competitions.

His children have carved out more public profiles. His son Adam Lindemann is a prominent contemporary art collector who lives in an avant-garde black concrete town house hidden behind an Upper East Side carriage house. A daughter, Sloan Lindemann Barnett, has been a fixture on the society pages in San Francisco and New York, where she sits on the board of New York University’s law school.

Another son, George Lindemann Jr., was a highly ranked equestrian. In 1995, a jury convicted him of charges related to killing horses for insurance proceeds. He is now an art collector and philanthropist in Miami.

Today, the elder Mr. Lindemann finds himself uncomfortably in the spotlight.

Although Williams’s proposal for Southern Union is priced higher, Energy Transfer’s bid has its own draws — for Mr. Lindemann. As part of the Energy Transfer deal, Mr. Lindemann and his top lieutenant, Eric D. Herschmann, scored consulting and noncompete agreements, to prevent them from forming a rival company.

The arrangements include guaranteed payments of $50 million over five years for both executives and use of the corporate jet “for any and all business and personal travel on terms no less favorable then currently.” In addition, Mr. Lindemann and Mr. Herschmann would get continued use of Southern Union’s offices and parking spaces in New York, Houston and Palm Beach.

“I have reviewed a lot of these consulting agreements but haven’t seen one as generous as this,” said Theo Francis of, a division of Morningstar that analyzes corporate filings.

The consulting deals raised the eyebrows of some longtime Southern Union shareholders, who have at times clashed with Mr. Lindemann. In recent years, Sandell Asset Management, an activist hedge fund, has criticized management for what it says are exorbitant pay packages, and the company’s board for lacking sufficient independence from Mr. Lindemann.

Shareholders have also expressed dissatisfaction with the way Southern Union approached a sale. While the company spoke with a number of suitors in addition to Energy Transfer and Williams, it did not run a formal auction that could have fetched a higher initial price.

”This is just George being George,” said Andrew DeVries, an analyst at CreditSights, who has followed the company for more than a decade. ”He has always taken care of himself, but over the long term he has also taken care of his investors.”

In the end, Southern Union shareholders could get a better deal than the current ones. The pipeline company’s stock closed Tuesday at $40.15, nearly 3 percent higher than the Williams offer.

It suggests the bidding war is only beginning.

Article source:

Speak Your Mind