Talley Industries, Inc. (Specimen)

Talley Industries, Inc. (Specimen)
Item# 4286talley
$29.95

       




Stock Certificate, specimen
Late 1900's
Security-Columbian Bank Note Company
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Talley began in 1960 as a tiny aerospace engineering firm in the desert north of Mesa, Arizona. The company was founded by German-born engineer Franz G. Talley and an experienced group of his associates who were also engineers. The venture, which was backed by some technically oriented investors, began with the specific purpose of developing various solid-propellant actuated devices and systems that could be used to help pilots and their crews escape from military aircraft in emergency situations. Talley prospered throughout the decade by developing advanced solid-propellant mechanisms and gas generators, which were purchased by the U.S. military and incorporated in numerous machines.

By the early 1970s Talley Industries had grown to become a Fortune 500 company, but the organization didn't achieve that status through sales of its propulsion devices. Instead, it grew rapidly during the late 1960s and 1970s largely by acquiring other companies, many of which operated in industries completely unrelated to Talley's core defense operations. Franz Talley initiated the growth strategy as a means of diversifying away from the defense sector. His ultimate goal was to reduce the company's dependence on military products to less than 50 percent of sales within three years. At the same time, he wanted to boost Talley's total sales volume to $100 million. Both of those objectives were accomplished within two years, vaulting Talley into the Fortune 500.

Among the first acquisitions was the 1968 buyout of The Waterbury Companies, a diversified manufacturer whose products ranged from metal buttons to insecticides. Then, in 1969, Talley added Adorence to its portfolio. Adorence was an importer of lower-priced women's and men's apparel. The acquisition that put Talley Industries on the map, however, was the 1970 takeover of General Time Corporation. General Time was a large manufacturer and marketer of clocks and timing devices, among other products. Venerable brand names assembled under the General Time umbrella included Westclox Seth Thomas. The merger was achieved as the result of a protracted proxy battle that angered many of General Time's shareholders. In fact, the Securities and Exchange Commission later sued to force Talley to pay those stockholders more money. The important result for Talley Industries, however, was that its revenue base was tripled as a result of the merger.

However, Talley gagged on its acquisitions in the early 1970s, and its organization began to become unwieldy, so it postponed its rapid growth campaign for a few years, streamlined its holdings, and jettisoned some nonperforming divisions. Franz Talley resumed the conglomerate strategy in 1973, when he became involved in real estate investing and development. Talley Industries jumped into the real estate business with the acquisition of the renowned Arizona Biltmore hotel and more than 1,000 surrounding acres. The sale included the 53,000-square-foot Wrigley mansion, which had been built in 1931 and was owned by the Wrigley (chewing gum) family until the 1970s. After the purchase, Talley hired a team of land planners and real estate professionals who expanded the hotel and developed a master-planned community around it. Throughout the 1970s Talley sold off chunks of the property to developers and even sold the Biltmore Hotel itself in 1977.

In 1976 Talley purchased Sencel Aero Engineering Corporation, a designer, tester, and manufacturer of aircraft ejection seats and air crew escape systems. The purchase was an obvious complement to Talley's original propulsion business, which was still marketing cutting-edge solid-propellant-activated devices in the mid-1970s. Soon thereafter, Franz Talley died suddenly of a heart attack at the age of 59.

Having restored the health of Talley's balance sheet, Bill Mallender and fellow executives resumed the company's acquisition drive in 1983. Their plan, though, was to purchase smaller companies in growing industries. Among Talley's first purchases was a California manufacturer of automated welding systems. Talley also jumped into a promising stainless steel minimill venture. Late in 1983, moreover, the company added to the still-intact real estate division with the purchase of a 66-acre parcel in Phoenix that included a large mall. Talley continued to buy and liquidate businesses going into the late 1980s. Importantly, the company jettisoned its apparel and clock divisions, giving it an emphasis on real estate and technical products (including many defense-related goods) by the late 1980s. Talley also made some odd moves, such as the purchase of the East-West Federal Bank, a $300-million (assets) savings bank and mortgage lender that served the Chinese-American community in Southern California.

The most important development for Talley during the late 1980s was its success in the vehicle air bag business. Demand for air bags by vehicle manufacturers throughout the world began to surge during the late 1980s, signaling the development of a giant new industry. Interestingly, Talley was poised to become a leader in the rapidly growing niche. Talley had been involved in the industry since its inception and was considered a pioneer of safety air bags. The company had started working on air bags in 1967 when Chrysler Corporation sought Talley's help in developing a compound to inflate its experimental air bags. Talley's designers tried gunpowder and freon, but the result was a poisonous gas. After other failed efforts, they finally devised a workable system that utilized a sodium azide propellant. Talley patented the system, but Chrysler had lost interest by then, so Talley approached General Motors (GM). During the mid-1970s GM ordered 22,000 air bags from Talley that it installed in Buicks, Cadillacs, and Oldsmobiles. After that, the air bag movement lost momentum as federal regulators and automakers squabbled. Meanwhile, Talley integrated the technology into its defense-related products and set the vehicle air bag on the back burner. Finally, the Department of Transportation ordered all carmakers to equip their cars with air bags by the late 1980s. Talley was suddenly positioned to significantly influence a soon-to-be-giant industry.

Talley toyed with the idea of manufacturing its own air bags. It was obvious to Talley executives, though, that they would have trouble competing with massive automobile manufacturers and suppliers that would inevitably compete against them. Rather than try to compete as a manufacturer, Talley decided in 1989 to license its patented technology to TRW Inc. In a huge transaction, Talley agreed to let TRW use its technology for 12 years. In return, TRW paid Talley nearly $100 million in cash and agreed to pay Talley about $1.15 for every air bag system that it sold, and about half that amount for every air bag sold by companies that it allowed to use Talley's technology. Talley expected to receive a total of $200 million to $300 million throughout the term of the agreement.

Talley narrowly escaped bankruptcy in the early 1990s. The company, still under Mallender's direction, scrambled to streamline and reorganize. By 1994 all of its divisions were producing profits except for the real estate business, which Talley was in the process of exiting. Importantly, in 1994 Talley enjoyed more than $17 million in royalties (pure earnings) from its air bag business, making that segment one of the company's most profitable. Its government products and services division contributed about $18 million in profits, while the industrial and specialty products divisions earned about $7.5 million and $5 million respectively.AZ-Arizona Automotive and Related Auto Parts and Service Aviation and Aerospace Clocks and Watches Specimen Pieces Allegorical Featured Allegorical Mercury



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