New Valley Corporation - Company Profile, Information, Business Description, History, Background Information on New Valley Corporation

100 Southeast Second Street
Miami, Florida 33131

History of New Valley Corporation

The inheritor of the businesses once owned by Western Union Corporation, New Valley Corporation is the owner of an investment banking and brokerage business and a commercial real estate management business. Although New Valley traces its origins back to 1851, when the predecessor to Western Union Telegraph Company was established, the company was not formed until 1991. The two businesses that constituted New Valley during the mid-1990s--Ladenburg, Thalmann & Co. Inc. and the New Valley Realty Division--were brought into the company's fold in 1995 and 1996, respectively.

The corporate name New Valley first surfaced in 1991 as a shroud to protect one of the most familiar brands in the history of American business. Western Union was floundering after a century of dominance, its preeminence in the telecommunications industry only a memory. To mitigate any further damage to the brand name's image, the company's shareholders voted on April 18, 1991, to adopt the New Valley name, thereby lessening the sting of witnessing the business press chart the fall of their once-great enterprise. New Valley Corporation was a new company in name, but one with a lengthy history.

19th Century Genesis of Western Union

Western Union rode the crest of the telecommunication industry's technological wave from its first days as a corporate entity. Incorporated as the New York & Mississippi Valley Printing Telegraph Company in 1851, the company was founded seven years after Samuel F. B. Morse tapped the first electro-magnetic telegraph message between two cities, a historic correspondence traveling between Washington and Baltimore. From 1851 forward, the telegram business represented Western Union's foundation, propelling the company forward and creating one of the most recognizable names in American business.

In 1856 New York & Mississippi Valley Printing Telegraph Company was renamed Western Union Telegraph Company. Five years later Western Union constructed the first trans-continental telegraph line, laying the groundwork for coast-to-coast communication, then introduced the commercial telegraph machine three years later.

20th Century Domination and Missteps

By the 1930s, after decades of growth fueled by the pervasive use of telegrams, Western Union reigned as a powerful force in the telecommunications industry, holding sway, according to one industry observer, as "a fat, happy monopoly." The Western Union name was familiar to generations of Americans who associated it with the dramatic announcements of life, including messages that told of birth, death, and homecomings, all handed to the recipient by a Western Union messenger. The company represented the fastest and trustiest messenger service in the country.

While carving its leading position in the telegram industry, Western Union missed the boat on the next huge technological development to dramatically alter long-distance communication. When Alexander Graham Bell tried to sell the patent for the telephone to Western Union for $100,000, the company refused the offer, opting to stick with its telegraph business. Later, Western Union executives did make some investments in telephone technology, acquiring several patents--including one filed by Thomas Edison--after realizing that the telephone was a good idea. Despite their belated attraction to the telephone business, company leaders decided that however promising the new invention was it was not the business for Western Union, so all the patents were sold to a new, rising power called AT&T.

In retrospect, the decision to forgo the telephone business during its early years was a regrettable move, but Western Union was a thriving enterprise that needed little else other than its rapidly expanding telegraph business to drive its growth during the late 19th century and the first half of the 20th century. After the 1930s, Western Union began to diversify gradually, establishing a private line communication service in the 1940s and creating a telex business following the conclusion of World War II. The introduction of telex messages by Western Union in 1958 marked the birth of what would serve as the company's second chief source of revenue.

However, the pervasive use of telegrams began to diminish and other forms of communications surged ahead. By the mid-1960s, the telegraph, which represented a substantial portion of Western Union's business, was well on its way out, usurped by the telephone. In response, Western Union executives changed the company's direction by refocusing on the telex as a major business and by continuing to explore other business areas. As the company's telex business expanded during the 1970s, several innovative developments offered hope that Western Union could restore its former luster, including the introduction of Mailgram service in 1970 and the operation of the first domestic satellite communications system, Westar, which was launched in 1974. As it turned out, however, Western Union was on the decline.

1980s: The Fall of Western Union

The company's telex business achieved encouraging success for a while, but when it became cheaper to send data over telephone lines the telex business began to suffer and Western Union found itself in dire straits. The company lost $59 million in 1983, and the following year, when annual sales eclipsed $1 billion, another $58.4 million was recorded as a deficit. Clearly, something needed to be done to arrest the slide.

In 1984 Western Union stopped paying dividends on its stock, and its banks cut off its lines of credit; over the next few years Western Union inched closer and closer to bankruptcy. It was during this period in the company's history that the next telling name change occurred, a move orchestrated by a turnaround artist named Bennett S. LeBow. LeBow entered the picture in 1987, when Western Union Telegraph Company became Western Union Corporation and LeBow was named the 136-year-old company's chairman. Together with Robert J. Amman, who was tapped as the company's chief executive officer, LeBow initiated sweeping changes throughout the Western Union organization, hoping to reposition the company as a technologically modern corporation able to compete in the world of sophisticated telecommunications.

When LeBow and Amman took charge, Western Union was a $940 million company deriving 75 percent of its revenue from its telex, money-transfer, and telegram services. In the future, the two leaders hoped to transform Western Union into a high-technology electronic messaging and consumer services company and collect the bulk of its sales from the telex business, its financial services subsidiary, and a newly formed travel services unit.

1990s: Bankruptcy and Birth of New Valley

As Western Union entered the 1990s, its telex business was shrinking 20 percent annually. The restructuring program implemented upon LeBow's arrival in 1987 had saddled the company with enormous debt, and its telegram and telex businesses had been damaged by new technology. The specter of bankruptcy, which had hovered over the company for nearly a decade, seemed inevitable as Western Union prepared for its 140th anniversary year. It was the fear of imminent bankruptcy and the attendant negative publicity bankruptcy would generate that led the company and its shareholders to effect a name change during Western Union's celebratory 1991 fiscal year, a move intended to keep its severe financial problems from further damaging the reputation of its subsidiary businesses. One of Western Union's original businesses, its money-transfer subsidiary Western Union Financial Services Inc., was demonstrating encouraging profitability as the 1990s began, but there was concern that if the Western Union name were dragged through bankruptcy court the subsidiary would suffer as result. Accordingly, on April 18, 1991, Western Union Corporation shareholders voted to change the name of their company to New Valley Corporation, hoping to shield the Western Union name from the public eye.

Western Union Financial Services Inc., as an independent subsidiary, would be able to conduct business as usual if its new parent company plunged into bankruptcy. New Valley assumed the debt accrued by its predecessor, and by the early 1990s, the debt had ballooned to $800 million, weighing the company down enormously as it tried to muster a recovery.

For the mid-1990s and the future, New Valley was working to reshape Western Union Financial Services Inc. to become a financial services provider to middle- and low-income consumers, making their company a "bank" for the estimated 15 million households in the United States without a traditional banking relationship. However, in 1993 New Valley slipped into bankruptcy, and in 1994 the company sold Western Union Financial Services Inc., all the Western Union money-transfer trademarks and tradenames associated with the Western Union name, and various other businesses, for $1.19 billion.

On January 18, 1995, New Valley emerged from bankruptcy and tried to reposition itself for the future. In May 1995 the company acquired Ladenburg, Thalmann & Co. Inc., a full-service broker-dealer involved in investment banking and securities and over-the-counter trading. Next, in 1996, New Valley acquired four commercial office buildings and eight shopping centers, giving the company a second facet to its business for the late 1990s and the years ahead. Thoroughly revamped for the 21st century, New Valley, the inheritor of a more than 150-year-old business icon, was transformed into the parent company of an investment banking and brokerage business and the owner of a business engaged in the ownership and management of commercial real estate.

Principal Subsidiaries: Ladenburg, Thalmann & Co. Inc.

Principal Divisions: New Valley Realty Division.

Additional Details

Further Reference

Andrews, Greg, "Vulture Snaps up Anacomp Securities," Indianapolis Business Journal, June 19, 1995, p. 1A."At a Loss for Words," Financial World, November 28, 1984, p. 23.Eng, Paul M., "Western Union's New Name Is Forgettable, by Design," Business Week, May 6, 1991, p. 120E.Frank, Robert, "LeBow's New Valley Gets FTC Approval to Buy a 15% Stake in RJR Nabisco," Wall Street Journal, August 30, 1995, p. A2.Ginsberg, Stanley, "This Time, Maybe?," Forbes, March 3, 1980, p. 82.Hammonds, Keith H., "Vultures in the Valley?," Business Week, November 7, 1994, p. 42.Hindlin, Eric, "Western Union, IBM to Link E-Mail Services, Allowing Message Exchange," PC Week, March 31, 1987, p. 14.Keller, John J., "Bob Amman Tries to Reinvent the Onion," Business Week, June 13, 1988, p. 33.Kretchmar, Laurie, "Gary L. Breitbart," Fortune, June 3, 1991, p. 212.Light, Larry, "The Vulture Investors Circling New Valley," Business Week, April 11, 1994, p. 4.Mintz, Steven, "Western Union Bets on the Money," Sales & Marketing Management, August 15, 1983, p. 37.Sutor, Ruthanne, "Lost Horizons: Missed Opportunities Have Nearly Wrecked Venerable Western Union," Financial World, April 18, 1989, p. 60."Tough Tidings: The Messenger Bearer's Woes," Time, March 18, 1985, p. 45.Woolley, Suzanne, "Western Union Banks on the 'Unbanked,"' Business Week, April 5, 1993, p. 71.

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