The three brothers are astute bargain hunters who now control more than $5 billion of assets. Friends of the family say their recent $523-million purchase of Scovill Inc. proves they aren't greenmailers and cheapskates--but Wall Street isn't convinced.

By Stratford P. Sherman RESEARCH ASSOCIATE Darienne L. Dennis

(FORTUNE Magazine) – The three brothers are astute bargain hunters who now control more than $5 billion of assets. Friends of the family say their recent $523-million purchase of Scovill Inc. proves they aren't greenmailers and cheapskates--but Wall Street isn't convinced.

MYSTERIOUS, controversial, and very, very rich, the Belzberg brothers of Canada--Samuel, William, and Hyman--confounded Wall Streeters in January with their acquisition of Scovill Inc. for about $523 million. The brothers are widely believed to be cheapskates--''They want to buy a dollar for eighty cents,'' complains an investment banker--yet they paid a price for the Waterbury, Connecticut, producer of Yale locks and other familiar products that some security analysts consider excessive. It works out to around 14 times last year's earnings. The Belzbergs are also regarded as greenmailers, yet they appear perfectly happy not to have been bought off by Scovill, and to be owners of their first U.S. industrial company. Despite their reputation, the Belzbergs appear to be nothing better or worse than successful practitioners of a particularly ardent and unmuddled brand of capitalism. Family intimates say the brothers learned it as toddlers from their father, Abraham, a Polish fishmonger who emigrated to Canada in 1919 and died a real estate tycoon in 1976. Devoted to one another and deeply rooted in family tradition, the brothers have been more consistent in their three decades of business dealings than most people realize. Like their father, they are opportunistic acquisitors who regard their capital as too precious to invest in any but the safest tangible assets. ''They like to kick the tires,'' says a financier who knows their ways. They shun risk with a firmness that has won them many admirers but few friends in the U.S. When the brothers were just getting started, they could borrow only against personal notes backed by everything they owned, so a single really sour deal could have wiped them out. As a result, the Belzbergs carefully consider the downside of every transaction. Once committed, they try to proceed with such caution that a profit is virtually guaranteed. Sam, 57, the middle brother and the only one with a college education, approves most of the Belzbergs' deals. His sense of value is so sure that a Belzberg investment almost inevitably attracts the attention of arbitragers and competing bidders. Several of the latter have bought the Belzbergs out at prices the brothers probably consider insane. Last year, in an extreme example, the Belzbergs bought $87 million of Gulf stock, 1.2% of the total, as part of T. Boone Pickens's now famous ''investment group.'' Seven months later Chevron Corp. (then Standard Oil Co. of California) bought the brothers' shares for a more-than-handsome $157 million. And the Belzbergs don't seem to mind accepting greenmail from independence-minded--a nd sometimes economically irrational--managements. U.S. Industries Inc. and Masonite Corp. paid premiums to buy out the Belzbergs and then were swallowed by other companies. Managements of no fewer than eight other major U.S. companies, including Blue Bell Inc. and H.H. Robertson Co., also fought off the Belzbergs--perhaps motivated partly by fear for their jobs. But when the dust settled, the brothers almost always came out with a profit. It is a wonder that such conservative financiers end up owning much, yet the Belzbergs' holdings are enormous. With a net worth believed to run well into the hundreds of millions of dollars, the brothers control a large and bewildering collection of public and private companies. Their largest, which Sam serves as chief executive, provides a classic example of the Belzberg approach to leverage: First City Financial Corp., a Vancouver bank holding company whose shares trade on the Toronto exchange. The Belzbergs' 69% of the stock was recently worth only $119 million, but it gives them control of First City's $2.9 billion in assets. The company's minority shareholders are not complaining. Thanks partly to stock profits from all those failed takeover attempts, First City has for the last five years produced impressive returns to investors. David Ramsay of the Toronto securities firm Wood Gundy estimates that its total returns--dividends plus stock appreciation--avera ged 31% a year through 1984, and return on shareholders' equity averaged 25%. The brothers use the same leverage technique as 62% owners of Far West Financial Corp., a publicly traded Beverly Hills savings and loan with assets of $1.8 billion. Their third major public company is 69%-owned First City Properties of Beverly Hills. With revenues of only $111 million a year, this real estate development company was the vehicle for the leveraged buyout of Scovill, whose 1984 revenues totaled $825 million. Wholly owned First City Capital of New York currently holds minority positions in some 20 major U.S. companies acquired for an estimated $300 million, including a stake in Revere Copper & Brass. An investment banker who knows the Belzbergs well argues that the brothers, all workaholics, ''are so similar the differences aren't worth thinking about.'' The three boys, as these grown men are still said to refer to themselves at times, are all about six feet tall and curly haired, though Bill, 52, and Hy, 59, are balding. ''They are very direct,'' says a friend. ''They don't kill you with subtleties.'' All are known to feel strongly about their identity as Belzbergs and as Jews, though none is Orthodox. Notoriously tough in business, the brothers nevertheless know how to relax, sharing an easy affability and a sense of humor that relies partly on droll tales from their youth. All are devoted family men, and two members of the younger generation--Sam's son, Marc, 30, and Hy's son Brent, 34--have taken prominent positions in the family enterprise. The brothers are also earnest and generous philanthropists: having lost scores of relatives to Hitler's gas chambers, for example, they are heavy backers of the Simon Wiesenthal Center for Holocaust Studies in Los Angeles.

THE BROTHERS are not clones, however. Although they share their profits equally, Sam, who lives in Vancouver, is usually the brother who earns them. He prefers phone calls to memos and frequently jumps out of his chair to pace as he talks. ''Sam's in the first turn while other guys are still tying their shoes,'' says an ex-employee. He makes decisions so fast that some of his subordinates suspect he acts on instinct, but investment bankers who have worked with him say Sam is a relentless and thorough analyst. Bill, the youngest, moved to Beverly Hills in 1976, perhaps to get out of Sam's shadow. He lives in a Spanish-style mansion formerly owned by actor Gene Hackman and socializes with TV emcee Monty (Let's Make a Deal) Hall and other local notables. Far West is Bill's fiefdom. He is an accomplished dealmaker in his own right with a special flair for real estate, but he is a more emotional businessman than Sam, and a tougher boss. Six men have served him as president of Far West since 1976. Bill has often been criticized for renegotiating apparently finished deals. ''He has to be sure he has squeezed out the last dollar,'' says one observer. ''I think he's trying to compete with Sam.'' Hy, the eldest, is the least visible. He still lives in sleepy Calgary, Alberta, and devotes most of his working time to Cristy's Arcade, a thriving furniture store inherited from Abraham that is among the Belzbergs' smallest holdings. His quiet life was interrupted in 1982 when three armed kidnappers --one a car salesman who had lost his shirt in commodities--hurled him into a rainbow-striped van and kept him handcuffed and blindfolded until Sam paid a ransom, soon recovered, of nearly $2 million. Hyman's other claim to fame is being spotted chatting on an Acapulco beach in 1970 with Miami mobster Meyer Lansky, who was reportedly there to carve up the action in Atlantic City with some business associates. Eleven years later the brothers had acquired 22% of Bache Group, and Harry Jacobs, chief executive of the struggling securities house, vigorously opposed them. Perhaps by coincidence, reports of the Acapulco encounter found their way into the press around that time. The family's reputation in the U.S. never fully recovered, although the FBI says it has no reason to believe Hyman has links to the mob. Jacobs lost his title and his company anyway, to Prudential Insurance Co. of America, in the first of a wave of so-called financial supermarket combinations. The brothers netted $28 million. If their financial dynasty can be said to have a corporate culture, it traces back to Radom, Poland, where Abraham grew up. His neighborhood in Radom was by all accounts an insular community, many of whose inhabitants spoke Yiddish, hewed to Orthodox traditions, and had suffered from the depredations of their Christian neighbors. In that environment clannishness had more than its usual social utility. Abraham left Radom at 22, one of hundreds of local Jews whose passage was paid by an earlier emigree named Bella Singer. When he arrived in Calgary, Abraham joined a small but growing community of transplanted Poles. Abraham began by working as a farmhand and in the abattoir of a local meatpacking plant. But his entrepreneurial skills showed up early. One of his first jobs gave rise to a family story that Sam still uses to instruct his employees. The owner of a small market, who employed Abraham as a produce buyer, gave him a raise but didn't give one to his own nephew, also a produce buyer. When the nephew protested, the owner explained that when he sent Abraham to the fields to buy strawberries, the young man would buy whatever offered the greatest potential for profit. But when the inept nephew was told to buy strawberries, he bought strawberries. By 1921 hardworking Abraham was flush enough to bring his wife, Hinda, and daughter, Fanny, over from Poland. Another daughter, Lil, was born in Canada, then the three sons. Fanny and Lil, both of whom married young and now live in Calgary near their mother and Hy, never caught their father's enthusiasm for commerce. But even as children the boys were expected to take paying jobs on weekends. They discussed business over the dinner table with their father, and each in his turn joined Abraham, for years a trader of used furniture, on his buying trips, learning young how to spot value. These lessons had their intended effect. As the oldest, Hy joined the family furniture store after a stint in the Royal Canadian Navy. Sam left home at 16 to study commerce at the nearby University of Alberta, selling used cars on the side. After graduation he began buying real estate, financed by the capital he had accumulated and a $15,000 revolving bank credit co-signed by his father. Bill went into the dog-food business and bought still more real estate, later selling his Red Top brand of processed horsemeat to Standard Brands. Adept land traders, the brothers also made killings in western Canadian oil leases. The family's entry into financial services came in 1962. At the time, Alberta was isolated from Canada's Toronto-based banking community. So Sam set up City Savings & Trust Co. (now called First City Trust, the principal subsidiary of First City Financial) along the lines of an S&L in the States. Among its original purposes was to finance the family's real estate deals, but it became a completely separate line of business for the Belzbergs. Its investments, though skewed toward real estate, later included equities, giving Sam the opportunity to develop his skill as a stock picker. The Belzbergs made their first big money--and a bunch of enemies--in 1973. A few years earlier they had brought most of their landholdings together into a company called Western Realty Projects, ending up with 62% of its shares after it went public. Then they accepted a $12-a-share buyout offer from a British company that offered nothing at all to Western's minority stockholders. After that the shares never approached $12 in public trading. Under laws then in effect the deal was perfectly legal, but it understandably aroused the ire of minority stockholders, who felt cheated. The deal went through even so, and the Belzbergs got $48 million.

WITH THAT STAKE they began investing in the U.S. Their original strategy, long since abandoned, evidently was to build a second financial services empire in the States. In a series of quiet and friendly deals, they bought Far West Financial as well as a publicly traded real estate investment trust and several other companies. Then, in 1979, they began investing in Bache. This episode, profitable but unpleasant, set the tone for most of the brothers' subsequent transactions in the U.S. Harry Jacobs apparently feared the Belzbergs more than Beelzebub himself--perhaps with reason, given the poor financial performance of the firm under his leadership. The brothers started by accumulating a 7% stake in Bache. Shortly thereafter Sam met with Jacobs, who made it clear he wanted nothing to do with the Belzbergs. Sam kept buying and eventually asked for two seats on the 16-member Bache board. Jacobs refused, and Sam--motivated now by anger, according to family intimates --bought still more shares, eventually raising the family's stake to over 20%. Jacobs went wild. Using treasury stock, he acquired an odd collection of small companies, including an Ohio smelter, which diluted the Belzberg holdings. He didn't protest when Bache's clients, the Hunt brothers of Texas --who had nearly ruined the firm by involving it in their huge silver- trading gamble of 1979--bought almost 7% of Bache's shares. And the press got the story of Hyman and Meyer Lansky. In the end Jacobs fled into the arms of Prudential, which kept him on as chairman but replaced him as chief executive after a year. The Belzbergs' big profit didn't erase the sting of the smear.

FROM THAT TIME until the Scovill deal the Belzbergs were unable to acquire a major publicly traded company in the U.S. They got Scovill only by dramatically changing their tactics. However fearsome they appeared in the ! past, in the end the brothers had meekly allowed managements to drive them away. This time they used force. After buying their usual small initial stake--6.3% in this case--Sam filed a hostile tender offer for the first time in his life. Explains Robert S. Pirie, 50, the investment banker from Rothschild Inc. who represented the Belzbergs, ''Having managements continually react the way they did made Sam realize there was no other way.'' William F. Andrews, 53, Scovill's chief executive, quickly announced that the brothers' $35-a-share offer was inadequate. He organized a private auction of Scovill, inviting the Belzbergs to participate. They won with an offer of $42.50 a share--and a promise to let Scovill's present management in for a piece of the company's equity. The offer bolstered arguments by family loyalists that the brothers, far from threatening managements of takeover targets, are financiers desperate to keep the operating experts in place. Andrews's board endorsed the revised offer with every appearance of enthusiasm. ''They were completely open, frank, and fair,'' says Andrews. ''I was surprised.'' The deal surprised almost everyone, but it has not put to rest the controversy about the Belzbergs' intentions. The brothers would probably argue that the Scovill takeover proves their claim to be acquisitors at heart, but Wall Street isn't convinced. Contends an investment banker who once worked for the Belzbergs, ''They had to buy one to be taken seriously as greenmailers in the future.'' The truth will no doubt become clearer as the brothers bid for more U.S. companies. A key executive at a First City subsidiary indicates that Belzberg watchers probably won't have to wait long for more clues: ''We are looking at a couple of opportunities,'' he says, ''right now.''