Today in Tedium: Every MBA knows the tale. Warren Buffett got so upset that he was being undercut on one of his investments, a textiles company, that he decided to screw over the guy who messed up his big payday. He bought so many shares of Berkshire Hathaway, the firm that did him wrong, that he became a majority shareholder—and his first task as majority owner was to fire the guy that tried to screw him over. (He calls the move “a monumentally stupid decision,” because he stuck himself with a declining textiles firm.) He gradually turned Berkshire Hathaway into a shell for his overall organization, one that does a bit of everything, including insurance, manufacturing, building supplies, even retail. It is the story of the great holding company, an organization that exists to manage a company’s larger operations. It’s slightly different from a shell company (a difference we’ll get into), but as that famous story implies, it doesn’t take much to divorce a company from its initial line of business. Today’s Tedium ponders the malleable nature of corporate ownership. A name is just a name. — Ernie @ Tedium
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The corporate shape-shifting that can cause “identity drift”
We’ve touched on the issue of morphing companies indirectly multiple times over the years. Back in 2022, we wrote about “hard pivots,” in which companies that started in one line of business ended up in another.
(The key example I used there was Regina, which came to success selling music boxes but was far more successful with vacuums.)
And then there are shell companies, which we covered way back in 2015, near the start of our little site. Back then, we focused on the fact that they were largely hiding a bunch of stuff under people’s noses, and they could do so easily. (Sheldon Adelson had just, at the time, bought the local newspaper in his home market of Las Vegas, but tried to hide the transaction from the journalists that covered him.)
Of course, just a few months later, the shell-company mother lode appeared in the form of the Panama Papers. That whole endeavor exposed a number of offshore entities that were hiding all sorts of businesses, good and bad, behind multiple layers of shell-company cruft. It was followed up by the Paradise Papers, which nailed a bunch of companies in the Mediterranean. (That leak came in handy when we were digging into Deadspin’s new owners a few months back.)
But shell companies have gotten much more interesting in recent years, in large part because businesses have gotten more daring and creative with what they’re willing to put inside a shell.
A good example of this is a kind of company that isn’t technically a shell company, but carries many of the outside traits of them. A special purpose acquisition company, or SPAC, has made it possible for companies to enter the stock market without needing to do the traditional dog-and-pony show of an IPO. SPACs have been around for a while, but they have not had a great run of late. (Just ask BuzzFeed, whose corporate failings have been exacerbated by their decision to enter the stock market using a SPAC in 2021.)
Then there are holding companies, firms that use the shell of a single corporate structure to bring increasingly diverse types of companies under one roof. These companies are usually related, but sometimes they may have no rhyme or reason other than that they have the potential to make money. These companies, which can be in the private equity realm or publicly traded, are common—Google’s corporate parent Alphabet is a holding company, for example. But Google, despite its dizzying array of services, does not actually push it very far.
You can barely see it, but Loew’s was once a big deal. (Wally Gobetz/Flickr)
What about someone who does? Here’s an example of that you may have heard of. You know the old-school movie theater chain Loews? It hasn't been around in about 20 years, having been consumed by AMC in the mid-2000s. That company saw its initial success when a Supreme Court decision forced companies like MGM to sell its movie theaters, which had been active under the Loew’s brand. (Apostraphe intended.)
The company operated the movie theaters for decades before spinning them off, but even though it doesn’t run movie theaters anymore, it kept the name. The modern-day Loews Corporation and it focuses on these four lines of business:
- Commercial property insurance, through its provider CNA Financial
- Hotels, through its Loews Hotels subsidiary
- Packaging, generally of consumer goods like food, through Altium Packaging
- Oil pipelines, through its oddly named Boardwalk Pipelines, a firm that suggests boardwalks for a line of work that rarely deals in boardwalks
The company, founded by Lawrence Tisch in the mid-1940s, also had major stakes in numerous other companies throughout its history, including Bulova (the watch company that produced the first-ever TV ad), Lorillard Tobacco Company, and a little network called CBS.
I can’t imagine that when Lawrence Tisch convinced his parents to invest in a New Jersey resort, he thought that his company would be running a network of oil pipelines in the end. But here we are.
The corporate owners of MoviePass during its implosion had a surprisingly complex history. (Lorenzo Santos/Flickr)
These unusual partnerships appear in other ways, too. You probably remember MoviePass from its chaotic corporate history under the firm Helios and Matheson Analytics. But here’s something that may surprise you—that firm’s corporate history goes all the way back to 1983, when it was called Software Ben-Tov, before changing its name to A Consulting Team. (Seeking Alpha has a history, if you’re curious.) The firm that acquired it, called Helios and Matheson, was actually based out of India, and it was focused on IT services for large companies—not analytics, as it was presented when it bought MoviePass, a startup whose founder Stacy Spikes had nearly been written out of his own story. While Helios and Matheson seemed like a fly-by-night corporation—something supported by news stories that came out about it in India prior to the MoviePass acquisition—the truth is that it was around 35 years old at the time Helios and Matheson bought it.
All of this is to say that when the machinations of corporate culture kick in, they can completely reshape the way that a company evolves. So, I had to write all of that setup to highlight one of the weirdest corporate histories I’ve ever seen, one that touches on two of the most iconic entertainment companies of the 20th and 21st centuries, and touches on two mainstream pop-culture phenomena that couldn’t be more different.
It involves both a shell company and a holding company. And if you know where to look, you’ll be able to find echoes of this company still hiding out today.
Four common tells that a shell company is sketchy
Recently, the credit-bond giant Moody’s put out a report talking about the factors that suggest a company that might not be above board. It’s actually pretty entertaining stuff because of how absurd it is. With that in mind, I wanted to share a couple of these details to watch out for:
- Company officers that are extremely old—or extremely young. The headline number of Moody’s entire report is that there are 2,265 people in its database of companies older than 123 years of age. This is false on its face for one key reason: There’s only one documented case of someone who lived to 122. (RIP Jeanne Calment, the French woman who smoked until the age of 120, only quitting because she could no longer light cigarettes on her own, and recorded an album when she was 121.) But there’s also something to be said of the 4,535 directors under the age of 5—as far as we know, Boss Baby is an Alec Baldwin movie, nothing more.
- A lot of registrations in the same place. There’s more than 22,000 business registrations at the Pyramids of Giza in Egypt, which sounds like a lot until you hear about the 61,000 registrations at a random strip mall in South Africa. It’s not unheard of to have a lot of business registrations at a single address—this is something that a lot of businesses do, especially in Delaware. But Moody’s notes that the registration levels can be a major tell for a credit-bond company. The reason? It suggests registrants are flooding the stream to hide illicit activity, especially if it’s done within the span of only a few days or months.
- A person who is the director of many companies. “Atypical directorships,” as Moody’s calls them, can hint at someone who is doing questionable things with their business filings. Notably, in the years after the Panama Papers were leaked, shared directorships fell by more than half, according to Moody’s data. So maybe there’s something to this!
- A lot of assets, not many people. The single-person company bringing in $2 billion in revenue? Huge red flag, even if it’s not necessarily a sign of nefarious activity. (We get it: Your drop-shipping business really took off.)
Yes, I made this image. Yes, I’m proud of it.
How the company that brought Frogger to the U.S. became associated with Maury Povich
It’s easier than you think for a company to experience identity drift. To present this point, I give you the story of a firm whose corporate history crossed through not one, but two mainstream brand-name corporations over a roughly 55-year history.
The story starts with a mistake made on the part of its two founders, Carl Grindle and H. Frank Fogleman, a pair of aeronautics veterans who had come up with an idea to put car phones in rental cars. (Given the headline of this section, I will allow you a moment to scratch your heads in confusion.)
Grindle and Fogleman wanted to name their company Grindleman Industries, a firm that combined their two names. But when they called the Delaware state registrar’s office to register the name, the person on the other end of the line heard Gremlin.
“At that time we weren’t in the game business, we were actually into screening integrated circuits,” fellow co-founder Gene Candelore recalled, per The Golden Age Arcade Historian.
So that was their name: Gremlin Industries. Didn’t really work for what they intended to launch the company for, but within a couple of years, the Pong phenomenon picked up, and it turned out Gremlin Industries was a great name for an arcade game company. So they kept the name and followed through with it, developing a kind of game that’s forgotten today but was very prominent in the period before arcade machines became smart enough to display complex graphics—the “wall game,” which is best described as Tiger Electronics-style game, except played on a giant scoreboard-like device as an interactive bar game. This is an extremely rare concept today, one you might have trouble looking up (WallGames.com might help), but it was a big deal in the years before video games truly hit their stride.
To give you an idea of what one looks like, here’s a video of “Play Ball,” the model that apparently proved that arcades were where they needed to be. It may not look like much today, but it was seen as high-quality and gave them an inroad into amusements. (Not helping: These things were a total pain in the ass to put together, with designs comparable to pinball machines.)
Gremlin followed the wall games trend to actual arcade games, with their first such game, Blockade, drawing a lot of buzz. (Ever play Snake? You now know what Blockade was like.) One problem—said buzz led to the game being cloned heavily by competing companies, such as Atari. And the pain from that situation put Gremlin in the position where it could be made a good acquisition target.
The company that started the modern-day Paramount empire.
Enter Sega Enterprises. In the 1970s, the Japanese arcade company Sega (which, as we’ve noted previously, started as an American company called Service Games) had recently been purchased by Gulf + Western. That firm was a massive conglomerate which itself started as an auto parts manufacturer called the Michigan Bumper Corporation. Sega was based in Japan by this point, but Sega Enterprises was launched in 1974 as the company’s U.S. arm. Sega Enterprises bought Gremlin, at this point an experienced player in the arcade space, a few years later. (Gremlin was initially treated as an independent subsidiary of Sega Enterprises, as documents from the Internet Archive show.)
Sega, needing a stronger base to bring its American games to the Japanese market, benefited greatly from this partnership, which saw Gremlin import some of Sega’s Japanese games, including Zaxxon and Pengo. But the one that proved to be the massive hit was Frogger, which was developed by Konami, but published by Sega in Japan.
That game earned a reported $135 million in its run, putting it at a scale near that of fellow arcade mega-hits Donkey Kong and Pac-Man. (It also inspired a classic episode of Seinfeld.) It was such a big hit, per Sega historian Ken Horowitz, that the company had to fend off clones—a familiar place for the former Gremlin, given what had happened to Blockade half a decade earlier.
But even a success of that scale wasn’t enough to keep its corporate parent interested. Gulf + Western was a deeply complex company, and it opened, closed, and sold off elements of its empire often. Sega was no exception. The Japanese arm of the company ended up doing a buyout of Gulf + Western’s stake, putting the firm in complete Japanese ownership for the first time in about 15 years. The massive American conglomerate did not miss it—after all, it had Simon & Shuster and Paramount under its corporate umbrella, and the video game industry had infamously just been through a major crash.
But the wild thing is, while Sega has not been associated with this company for 40 years, meaning Gulf + Western almost completely missed Sega’s successful home-consoles era, Sega Enterprises did not end up staying with Sega after the merger. And that company that launched as Gremlin ended up getting a new name, AGES Electronics.
In the meantime, AGES Electronics has changed significantly, but so too has the company that operated it. In the late 1980s, Gulf + Western figured out that maybe it shouldn’t be a company that dabbles in caskets and auto parts manufacturing and streamlined to its entertainment offerings. Reflecting the shift in focus, it became Paramount Communications in 1989 and was acquired by Viacom in the mid-1990s. At different points in its corporate history, the company known as Paramount has owned CBS, split off CBS, bought different film studios, and owned (and degraded) many of the most popular channels on cable.
(CBS sure comes up a lot in stories like this, doesn’t it. We haven’t even brought up Westinghouse! Don’t tempt us with a good time.)
Recently it was announced—after a round of will-they-won’t-they drama—that it would be merging with Skydance. Through it all, AGES Electronics and the related Ages Entertainment Software LLC have been a constant on corporate filings, listed in public databases along with the companies’ association with the many iterations of Paramount, Viacom, and CBS.
The State of California makes this hard to directly link, but if you go to the Secretary of State’s site, search for AGES Electronics, and download the business document, you will see that this business is associated with Maury Povich. A quick search of business history will confirm the association with Sega.
The address of AGES Electronics, as listed in its California business filing, is 5555 Melrose Ave. in Hollywood, California, which is the address to Paramount Studios. Interestingly, in the box where it says “Type of Business,” the file says “The Maury Povich Show.” Now, here’s the interesting thing about this. The Maury Povich Show, which was shot in New York, has not been a thing since 1998 (it changed its name to Maury around that time), and Paramount did not produce the show after 1998, despite it airing all the way through 2022. That means this shell company’s business records have not been correctly updated in more than 25 years.
The “you are not the father” jokes write themselves.
I don’t think I could paint a better example of how convoluted corporate histories can get under shell companies and holding companies than the story of Gremlin Industries, which was, at least for a few years, Sega.
Corporate assets have unusual value in the modern day. Even if something isn’t necessarily a great business on its own, it can be an excellent part of a good portfolio, especially if that is being poorly run by people who don’t know what they’re doing. The nice thing about holding companies is that they’re usually staffed by reasonably good business professionals.
Put another way, I don’t believe that private equity firms are trying to kill popular brands like Red Lobster when they acquire them in leveraged buyouts.
But I do think the era of the highly diversified corporate conglomerate with confusing, disparate interests that are connected with little rhyme or reason? That era is likely past. Sure, companies will most certainly do it, but it won’t be anywhere near as prominent as it once was. Remember, we’re talking about companies that were large enough to buy CBS despite having little surface interest in the contours of television.
Sure, surprises will emerge—maybe a budding investor with a Warren Buffett-like demeanor will get pissed off by an investment one day and do something “monumentally stupid.”
But caskets and arcade machines, despite each involving massive wooden vessels, simply don’t look all that great next one another in a product portfolio.
Don’t let the lesson of Gulf + Western pass you by.
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