Harold Simmons - Career

Career

After completing graduate school in 1952, Simmons worked for the U.S. government as a bank examiner, then for a Dallas-based bank, Republic National Bank.

In 1960, using $5,000 of his savings, and a $95,000 loan, he bought a small drugstore, University Pharmacy on Hillcrest Avenue, across from the campus of Southern Methodist University. Before Simmons owned it, University Pharmacy was the site of a racially charged sit-in in January 1961, when its owner C.K. Bright sprayed insecticide over and around 60 students, only two of whom were black seminary students. Simmons purchased the store and parlayed it into a chain of 100 stores, which in 1973 he sold for more than $50 million, to Eckerd Corporation. This launched his career as an investor, when he used the proceeds of that sale to begin speculation in the financial services industry. By 1974, he had been indicted for and acquitted of wire and mail fraud, and involved in a pension-related lawsuit brought against him by the United Auto Workers.

Simmons developed his "all debt and no equity" philosophy of capital management from having observed banks as a bank examiner, realizing that "Small banks in Texas were casual about getting the maximum use of their funds. . . banks were the most highly leveraged thing I saw. They borrowed most of their money and really didn't need much equity except for purposes of public confidence." Understanding that banks could be bought entirely with borrowed money, Simmons theorized that he should "buy a bunch, because one bank could be used to finance another. All debt and no equity."

Simmons conducted a widely publicized but unsuccessful takeover attempt on the Lockheed Corporation, after having gradually acquired almost 20 per cent of its stock. Lockheed was attractive to Simmons because one of its primary investors was the California Public Employees' Retirement System (CalPERS), the pension fund of the state of California. At the time, the New York Times said, "Much of Mr. Simmons's interest in Lockheed is believed to stem from its pension plan, which is over financed by more than $1.4 billion. Analysts said he might want to liquidate the plan and pay out the excess funds to shareholders, including himself." Citing the "mismanagement" of its chairman, Daniel M. Tellep, Simmons stated a wish to replace its board with a slate of his own choosing, since he was the largest investor. His board nominations included former Texas Senator John Tower, the onetime chairman of the Armed Services Committee, and Admiral Elmo Zumwalt Jr., a former Chief of Naval Operations. Simmons had first begun accumulating Lockheed stock in early 1989 when deep Pentagon cuts to the defense budget had driven down prices of military contractor stocks, and analysts had not believed he would attempt the takeover since he was also at the time pursuing control of Georgia Gulf.

In 1997, Simmons made a $5 million investment in T. Boone Pickens, Jr.'s first fund BP Capital Energy Commodity Fund; by 2005 this had grown to $150 million.