Michael Price, Who Saw Value in Companies’ Struggles, Dies at 70

(Bloomberg) — Michael F. Price, a renowned value investor known for pushing for change at underperforming companies, has died. He was 70.

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He died peacefully in his sleep on Monday after a lengthy illness, according to Timothy E. Ladin, general counsel and vice president of Price’s New York firm, MFP Investors LLC.

“He was a legendary investor, philanthropist, and a great mentor to us all,” Ladin said. “He will forever be remembered as a kind and generous person who always put other people first and made a difference to this world.”

Price boasted one of the best records in mutual fund management in the 1980s and 1990s and was known for a brand of activist investing that was uncommon at mutual funds. He instigated the merger of Chase Manhattan Corp. and Chemical Banking Corp. in 1995, a $10 billion transaction that created the largest U.S. bank at the time. He also helped push out the chief executives of companies including Dial Corp. and appliance maker Sunbeam Corp.

He searched for value amid beaten-down companies. “We like to buy a security only if we think it is selling for at least 25% less than its market value,” he told Fortune magazine for a 1996 profile.

“When a company gets into trouble and starts to miss its earnings, analysts drop coverage because they don’t want to embarrass their firm with bad calls,” he told Fortune. “So mainstream Wall Street isn’t looking anymore. Which pond would you rather fish in, one with a lot of fishermen or only a few?”

Price began his career in the 1970s as a research assistant to Max Heine at Heine Securities in New York, which Forbes magazine in 1986 called “one of the most successful of the medium-size mutual fund groups.” Heine, 75 at the time of the Forbes story, was preparing to hand the firm’s reins to Price, then 34.

Three Funds

The two men managed three funds, all of which invested in undervalued stocks. The oldest one, Mutual Shares, “hasn’t had a down year in the past decade, and it has averaged returns of 24% a year since 1976,” Forbes reported.

Following Heine’s death in 1988, Price bought the company. As a tribute to his mentor, Price donated $1.25 million to New York University’s Graduate School of Business to establish the Max L. Heine professorship in finance. He also moved the firm out of Manhattan and to Short Hills, New Jersey, closer to his home.

Seth Klarman, founder of the Boston-based hedge fund Baupost Group and a renowned value investor himself, said Price helped teach him the craft of buying undervalued assets.

“Michael was very smart and quick. He was deeply curious and he would dig and dig,” said Klarman, who worked with Price and Heine as a summer intern in 1978, and then in 1979 and 1980 after he graduated from college.

‘Obscure and Murky’

Klarman said during those days, Price and Heine were active in railroad bonds, which were complex investments. Klarman said it taught him that “the more obscure and murky the security sounds, the higher the chance it will be interesting.”

Under Price’s leadership, the firm grew to more than $17 billion under management by the time he sold it to Franklin Resources in 1996 for more than $600 million. He had an estimated net worth of $1.3 billion, according to the Bloomberg Billionaires Index.

His alma mater, the University of Oklahoma, named its business school for Price in recognition of a 1997 gift of $18 million. In 2005, the university dedicated a new learning space at the business school as Michael F. Price Hall.

In a statement on Tuesday, the university’s president, Joseph Harroz Jr., called Price “an extraordinary friend and benefactor.”

“His generosity transformed OU — both at the College of Business, which bears his name, and all across our campus,” Harroz said. “He has left an indelible impact from which generations of Sooners will benefit. We grieve with the Price family today, but we know that Michael’s remarkable legacy won’t soon be forgotten at OU.”

First Stock

Price was born in 1951 and grew up in Roslyn, on New York’s Long Island.

In an interview for the 1999 book “Investment Gurus: A Road Map to Wealth from the World’s Best Money Managers,” by Peter J. Tanous, Price said he was in junior high school when he bought his first stock, Bandag, through his father’s broker, and watched it almost triple in value.

He said another of his father’s friends got him interested in risk arbitrage, or investing in companies ahead of possible mergers and acquisitions.

“I spent a summer observing a small arbitrage department — a woman and three guys sitting around two desks joined together with wires to the floor of the stock exchange and proxies on their desks,” he told Tanous. “They were just trading in the stocks of companies that were about to merge, taking advantage of small discrepancies in the price spread between the two companies. I said, here are three guys — and I knew one of them was making a million dollars a year, and this is the late 60s — and I said, ‘If these guys can sit on their butts and make a lot of money by reading various things, there’s something to this.’”

After earning a bachelor’s in business administration from Oklahoma in 1973, he joined Heine Securities.

He gave up day-to-day management of Franklin Mutual Advisors in 1998 when he started MFP Investors, primarily to oversee his own fortune. He also ran money for the endowments of Yale University and Middlebury College. He stayed on as chairman and director of Franklin Mutual until 2001.