The Ziegler Companies, Inc.
The Ziegler Companies, Inc.
Incorporated: 1920 as B.C. Ziegler and Co.
Total Assets: $167.47 million (1997)
Stock Exchanges: American
Ticker Symbol: ZCO
SICs: 6153 Short-Term Business Credit Institutions (Except Agriculture); 6211 Security Brokers & Dealers
The Ziegler Companies, Inc. provides a complete range of investment services and is widely regarded as the largest institutional bond underwriter in the United States, not to mention the largest investment banking firm for healthcare finance outside Wall Street.
In 1902, West Bend, Wisconsin, was a small bustling mill town famous for the hotels it had built to put up travelers making the two-day trip between Milwaukee and Fond du Lac. The son of a hotelier and county treasurer, 18-year-old Ben Ziegler had been selling fire insurance policies to area farmers and merchants to supplement his income as an assistant for the county’s treasurer and register of deeds. In 1902 an insurance agency owned by a friend of Ziegler’s father ran into financial trouble; as the agency’s co-signer, Ziegler’s father assumed its debt and the responsibility for finding a new agent for the business. Despite Ben’s young age, Ziegler’s father made Ben that new agent, and the young entrepreneur promptly began selling insurance policies to area businesses out of a room in his father’s hotel. By 1905 Ben had saved up $6,500, which he used to pay off his father’s farm and saloon, and a home for him two years later. By 1906 Ziegler and his former employer in the insurance business, Henry Opgenorth, formed a new agency, Opgenorth and Ziegler, which fell apart only 18 months later after disagreements over the business. Opgenorth and Ziegler split the territories and went their separate ways.
“The Real Beginning”: 1906-29
Still only 22, Ziegler had built a reputation as an enterprising, sharp-witted businessman, and in 1906 he was elected a director of the West Bend Mutual Fire Insurance Co. To drum up business, he began bicycling to the nearby Wisconsin communities of Grafton, Two Rivers, Manitowoc, and Sheboygan to sell fire insurance and farm mortgages to anyone who wanted them. In 1902 representatives of a land company convinced Ziegler to recruit West Bend home seekers to buy property in South Dakota. When Ziegler himself visited the South Dakota lands, however, he learned that the sellers were peddling $300 dollar properties for a grossly inflated $1,600. Burned by the boondoggle, Ziegler vowed that any loan he made in the future would have to be secured by an owner who was “known to be responsible” in the West Bend area. Rather than offer the six or seven percent return investors were promised in South Dakota, Ziegler’s four to 4.5 percent return was smaller but far more secure. His reputation for conservatism was established.
As the radius of his insurance territory grew in the early 1900s Ziegler traded in his bicycle for a horse and buggy so he could still make it back to West Bend every night to help his mother at the family’s boarding house. By 1907, Ziegler’s insurance business had grown to encompass virtually all of southeastern Wisconsin and its three largest cities, Milwaukee, Racine, and Kenosha. In the years that followed Ziegler’s business steadily expanded northward and westward. The so-called Roosevelt Panic of 1907 ironically turned out to be one of the biggest blessings of Ziegler’s young career. The bank panic had caused depositors around the country to pull their savings from their neighborhood banks, and Ziegler was no exception. When the crisis passed and depositors began returning their savings to the nation’s bank vaults, however, Ziegler decided to keep his, using the money instead to make loans to local busi-nesspeople. “The net result,” Ziegler later recalled, “was that I did more business in 60 days than I had done in the four years previous. This was the real beginning of the investment business for B.C. Ziegler and Co.”
Ziegler also capitalized on his readiness to service his territory personally to learn more about the insurance needs of his far-flung customers. He soon counted among his customers such typical of the time Wisconsin businesses as elevator makers, gas engine plants, saloons, breweries, and malt houses. In 1911, two West Bend businessmen approached Ziegler for his advice on potentially profitable new businesses for the West Bend area. Having recently visited an aluminum manufacturing plant in Two Rivers, Ziegler recommended they start an aluminum plant, and in September 1911 Ziegler and his new associates formed the West Bend Aluminum Company, which was soon making pie plates, pudding pans, and dish pans. The company, with Ziegler at the helm, became the largest manufacturer of aluminum cooking utensils in the United States by the 1920s. Ziegler also helped establish the first national bank of West Bend and by 1917 had become its president as well.
But Ziegler’s core business remained insurance and loans. By 1913 B.C. Ziegler and Co. was one of the largest insurance agencies and farm mortgage companies in eastern Wisconsin. The business that would eventually become Ziegler and Co.’s stock in trade—institutional lending—began modestly in 1913 when the pastor of West Bend’s Church of the Holy Angels asked Ziegler’s father if his son would loan him the money to build a new church. Ziegler deemed the risk a reasonable one, and the pastor walked away with a $30,000 bond issue. Next, the pastor of Sacred Heart Church of Racine requested and received a $13,000 loan from Ziegler as well. Within a few years Ziegler was also doing business with the so-called “building pastors” of Milwaukee, and in 1922 Ziegler made his first major bond issue with a $100,000 offering for St. Sebastian’s church. In 1928 Ziegler arranged its first institutional loan outside Wisconsin, extending a $485,000, five percent bond to the Missionary Sisters, Servants of the Holy Ghost, of Techny, Illinois, so they could erect a hospital in Waukegan. Without planning on it, Ziegler had initiated the business that would soon make his company the largest church bond issuer in the country’s history.
While attending the Republican Party’s national convention in Chicago in 1916 Ziegler ran into Delbert J. Kenny, the assistant principal back at West Bend High School. Ziegler and Kenny struck up a conversation and, impressed by Kenny’s personality, Ziegler offered him a place with his firm on the spot. Kenny would eventually rise to become Ziegler and Co.’s third president. When the United States entered World War I in 1917 most of Ziegler’s male employees left to join the fight in Europe. Business stagnated, but when Ziegler’s men demobilized in 1919 Ziegler’s firm began a renewed period of growth. In 1920 Ziegler incorporated B.C. Ziegler and Co. and by the early 1920s the firm had become one of the state’s leading farm financing companies, prudently extending loans only to the most stable dairy farmers of southern Wisconsin. As the U.S. economy boomed in the 1920s Ziegler expanded his company’s bond business by charging a fair rate of interest on bonds, never offering “speculative” securities, paying investors their interest and principal on time, and willingly lending moneys to home and farm owners who could establish their “good reputations and good security.” By the late 1920s Ziegler’s customers numbered more than 5,000, and Ziegler was one of the 10 or 12 largest insurance agencies in Wisconsin, issuing primarily fire and tornado (though not life) insurance policies through the Mutual and Old Line insurance companies.
Growth Through Church Bonds: 1929-59
If Ziegler sought a new opportunity to demonstrate his business acumen, the great crash of 1929 gave it to him. While traveling in Kansas in early 1929, Ziegler saw firsthand the financial problems facing Kansas farmers. Figuring that if the country’s farmers were facing difficulties, the national economy as a whole might not be as healthy as Wall Street wanted to believe. Ziegler concluded, he later recalled, “that business had just about reached its high point, and that we might be looking forward to a recession.” He therefore sold all his stock and instructed his partner at West Bend Aluminum to commit to no new production and to cancel as many of his current commitments as he could. Moreover, he told his vice-president at Ziegler and Co. to pay off the company’s $300,000 in debt within 60 days. By October 1929, when “the stock crash came,” Ziegler recalled, “we had practically no commitments, no debts, and a nice cash position.”
Ziegler also proved clairvoyant about the severity of the Depression. While attending a Rotary convention in Vienna, Austria, in mid-1931, Ziegler was struck by Europe’s desperate economic conditions and on his return readied his company for the worst. By October 1931, when the post-crash downturn bottomed out into full-fledged depression Ziegler had liquidated $2.5 million in debts, and could confront the worst economic period in U.S. history with a war chest of cash. As the Depression staggered on, Ziegler managed to increase the size of its workforce, prevent its investors from losing money on their institutional bonds, and boast the best ratio of losses on farm loans of any lender in Wisconsin. In the last quarter of 1931, in fact, Ziegler issued more institutional bonds than in all of 1930. Ziegler’s willingness to lend money to finance-strapped churches turned into a shrewdly conservative investment in the speculation-shy climate of the 1930s, for as one of Ziegler’s lieutenants later recalled, “people were afraid of everything—except church bonds.”
We believe in the American free enterprise system. We shall consistently treat our clients, employees, shareholders and community with honesty, dignity, fairness and respect. We will conduct our business with the highest ethical standards.
In 1936 Ziegler made the largest institutional bond issue in its history, a $3.1 million issue to St. Mary’s College and Academy and Marygrove College, both of Michigan. In the same decade, Ziegler established a subsidiary, Home Builder’s Inc., to build about three to six homes a year in the West Bend area, and began acquiring farms that had gone bankrupt as the economy spoiled. Ziegler’s Real Estate Department then began to sell the properties, adding another income stream to Ziegler’s machine. Ziegler also established The Security Company, which in the 1940s and 1950s bought up land in the West Bend area and subdivided it into housing properties. In 1942, Ziegler’s West Bend Aluminum Company was awarded Navy “E” for excellence awards for its munitions manufacturing achievements, and in 1944, with the war’s end in sight, Ziegler and Co. made its first institutional underwriting on the West Coast—a $900,000 loan for the Lutheran Hospital Society of Southern California. By the time of founder Ben Ziegler’s untimely death at age 62 in May 1946, his company’s thriving institutional bond business was expanding nationwide through ongoing college and church loans (its two biggest categories) to communities in the Midwest and South. (Ziegler’s partner, Delbert Kenny, who had assumed the firm’s reins in 1942, continued on as president until 1965.)
As millions of U.S. servicemen began streaming home in 1945 and 1946, Ziegler and Co. had used its property purchases to create new parcels of home-sized lots ready for sale to them. In the postwar years, Ziegler’s’foray into the housing industry continued when the company became a distributor and builder for National Homes, a maker of $10,000-plus prefab homes for the booming residential housing market. With its bond and mortgage business expanding, Ziegler and Co. was forced to update its correspondence-based marketing network, and in 1949 opened its first sales office in Milwaukee, which was followed by offices in Fort Atkinson, Appleton, and Minneapolis by 1952. By the early 1960s, Ziegler’s sales office network had grown to 12, extending from Toledo, Ohio, and St. Louis to as far west as San Francisco.
From Church to Hospital Bonds: 1961-77
Ziegler sold more church bonds between 1945 and 1965 than at any previous period in its history—most for the construction and modernization of church-owned schools and retirement homes. The early 1960s were a particularly active period for Ziegler’s church bonds, and the period was quickly dubbed “the diocese financing.” The diocese of Buffalo, New York, raised $16 million through Ziegler in 1960, for example, and between 1962 and 1964 the Archbishop of Boston raised $35 million with Ziegler bonds. In 1964, Ziegler was a pioneer of a new type of institutional financing instrument known as the collateral trust bond. Through its new subsidiary, First Church Financing Corporation of America (FCFCA), Ziegler acquired loans made to churches and other institutions that, because they were too small to justify issuing as individual bonds, were merged and marketed as collateral trust bonds. Between 1964 and 1967 alone, FCFCA issued and marketed $23.8 million of these bonds. Following founder Ben Ziegler’s penchant for diversification, in the early 1960s Ziegler and Co. became the underwriter for the first institutional bond offering insured by the Federal Housing Authority, for a retirement home in Seattle.
By the time the son of Ben Ziegler’s longtime partner Delbert Kenny assumed Ziegler’s presidency in 1965, the construction boom in church and church-related educational facilities had topped out. Thomas Kenny thus began to focus the firm’s energies on the still-growing niche of bond underwritings for the construction, enlargement, and modernization of hospitals. Despite the sophistication of the instruments Ziegler’s sales force was selling, their methods were straightforward enough. A salesman would be assigned to a new hospital and set up camp in a hospital office for a few days, counting on the kind of local interest a large newly expanded facility attracts to bring customers to his door. As a Ziegler sales manager would later tell Bond Buyer magazine: “At that time [i.e., when a hospital has been enlarged or modernized] everybody had such a great feeling about their local hospital that we would get tons of people coming in. They wanted to buy it; they wanted to support it.”
One instrument Ziegler used to finance its new hospital bond business was the short-term (three- to nine-month) construction note, which was sold to corporations across the country to fund the period early in a hospital’s construction or modernization program before a bond sale or other form of “permanent” financing secured the project’s capitalization. Stemming from this innovation, in 1969 Ziegler and Co. formed the Ziegler Financing Corporation (ZFC) as an operating company to provide similar short-term construction loans for commercial and industrial projects. In the years that followed, ZFC would underwrite short-term notes for the construction of nursing homes, condominiums, industrial buildings, retirement homes, mobile home parks, hotels, and housing projects authorized by the federal government’s Housing and Urban Development (HUD) agency.
In 1971 another child of Ziegler’s hospital underwriting business emerged, when the Ziegler Leasing Corporation (ZLC) was formed to design customized leases for hospitals seeking to lease medical equipment such as X-ray machines, intensive care equipment, nuclear medicine devices, and other hospital technologies. This in turn led in 1972 to a new department within ZLC created specifically to handle leases for commercial and industrial equipment. With its stable of operating companies proliferating, Ziegler decided to create a new holding company structure to give its individual units free rein. The Ziegler Company, Inc. was thus formed in December 1971 and its stock issued to the over-the-counter market.
In June 1972 President Thomas J. Kenny, his wife, and four of his children were killed when their jetliner crashed in South Vietnam on a flight from Thailand to Hong Kong. The tragedy (which was apparently accidental and unconnected to the fighting on the ground) shocked the close-knit West Bend business community. Longtime Ziegler veteran Ken Marsden assumed the firm’s presidency, and a year later founder Ben Ziegler’s two sons, Bernard and R.D.—who had not planned to join their father’s business—were named chairman of the board and president/CEO, respectively. Ziegler and Co.’s business was meanwhile showing no interruption. New branch sales offices had been opened in Kenosha and La Crosse, Wisconsin, and Springfield, Illinois, in 1967; Sheboygan, Wisconsin, in 1969; Green Bay, Wisconsin, and East Lansing, Michigan, in 1970; and Orlando, Florida, in 1971.
The firm also continued its historical penchant for scouting out new business opportunities by becoming the sole distributor of a mutual fund based in Milwaukee in 1967 and then three years later unveiling its own family of mutual funds. Taxable hospital bonds remained Ziegler’s largest investment product in the late 1970s, but it also expanded into more conservative investment instruments during the period. In 1973, for example, it acquired a Chicago firm that specialized in originating and underwriting municipal and nonprofit revenue tax-exempt bonds. The addition, renamed Ziegler Securities in 1976, expanded still further Ziegler’s portfolio in the management of tax exempt financing in the healthcare industry. In 1974, Ziegler had also introduced its American Tax-Exempt Bond Trust and in the late 1970s unveiled the American Income Trust, a portfolio of corporate bonds designed to throw off high income while preserving the investor’s principal.
Steady Growth: 1978-93
By the late 1970s, Ziegler remained the largest institutional bond underwriter in the United States (some 2,600 bond issues valued at almost $4 billion by 1977) and had solidified its claim to truly national status by opening branch sales offices in Denver and Portland in 1975 and Indianapolis and Grand Rapids in 1976. It had sold more hospital bonds than any other firm in U.S. history, and 625 of the nation’s 3,364 private-sector, not-for-profit general hospitals had used Ziegler as the underwriter of their bond issues by 1977. Ziegler continued to underwrite major bond issues for prominent U.S. institutions and corporations in the 1980s, including a $12 million mortgage bond issue for Associated Doctors Hospital and a $20 million notes issue for American Family Financial Services, both in 1980, and in 1982 a $10 million underwriting of senior notes for Northwestern Mutual Insurance. In the early 1980s, Ziegler Securities became a separately named division of the B.C. Ziegler and Company, and in 1984 the firm launched a “fully hedged” tax exempt bond fund to broaden its offerings of high-yield but capital-preserving investment vehicles. Similarly, in 1987 Ziegler and Co. teamed up with Wisconsin banking giant M & I bank to serve as “co-advisers” of a new mutual fund. In April 1986, a third generation of Zieglers assumed command of the firm when Peter D. Ziegler (a first cousin of founder Ben Ziegler’s grandson) was elected president of the holding company and all its subsidiaries, and in December 1989 Ben Ziegler’s son R. D. finally stepped down as CEO after 16 years at the helm. Within a month Peter Ziegler was the new CEO.
In 1990 Ziegler’s collateral trust bond subsidiary was newly incorporated as First Church Financing Corporation (FCFC) to issue, like its predecessor, mortgage-backed bonds collater-alized by pools of notes secured by the first mortgages on church buildings and properties. That same year, Ziegler Securities marketed 47 healthcare financings—the most of any firm in the nation. In 1991, Ziegler’s annual revenues, which had seesawed back and forth between $34 and $40 million a year since 1986 finally reached the $40 million plateau for good and by 1993 were breaking the $50 million mark. In 1991 Ziegler began listing its stock on the American Stock Exchange and established two new subsidiaries: Ziegler Asset Management, Inc. (ZAM) and Ziegler Collateralized Securities, Inc. (ZCS). ZAM provided money management services (such as pension planning) in stocks and bonds to individual customers, institutions, and the parent firm’s Principal Preservation Portfolio family of mutual funds. By late 1997 ZAM was managing some $1 billion in assets. ZCS was formed to issue bonds that were collateralized by pools or leases and other types of debt instruments packaged and sold to it by Ziegler Leasing Corporation, the firm’s equipment leasing business.
By 1993, two new subsidiaries had also joined the Ziegler stable. Ziegler Thrift Trading (ZTT) was created to offer discount brokerage services to the booming stock, bond, mutual fund, and options market without the advice and research services that characterize full service brokerage houses. Waste Research and Reclamation (WRR) reflected Ziegler’s willingness—first reflected in Ben Ziegler’s participation in the creation of West Bend Aluminum in 1911—to diversify into nontraditional areas of business. WRR (founded in 1970) operated hazardous waste treatment and waste solvent recycling facilities for industrial chemicals and solvents in Eau Claire, Wisconsin, and by 1995 was generating revenues of $3.8 million—or almost nine percent of Ziegler’s total 1995 revenues. Two of Ziegler’s diversifying ventures were short-lived. Beginning in 1994, Ziegler held a one-third interest in Heartland Capital Company, a loan originator for the construction of affordable housing projects, and the same year it began purchasing automobile installment loans to be held until they could be pooled together and sold as securities. By 1997, however, Heartland had gone under and Ziegler had uncovered unpromising information about the quality of the auto loans it had purchased and began retreating from that line of business.
“Senior Living Debt” and Stocks: 1994-98
In 1993 Ziegler underwrote the largest church bond issue of its history, a $14 million issue for the Germantown Baptist Church of Memphis, Tennessee. By then the firm was also widely regarded as the largest investment banking firm for healthcare finance outside Wall Street. Just as Ziegler had seen the writing on the wall in the 1960s and switched its emphasis from church to hospital bonds, so too in the consolidating and chaotic healthcare climate of the early 1990s it looked for new, still-growing bond markets. “Senior-living debt” was the answer. As the population aged, the demand for retirement facilities snowballed and Ziegler and its Senior Living Finance Group rushed in. As John Wagner, Ziegler’s retail sales manager, told Bond Buyer in 1996, “maybe 10 years ago, we did very few issues in senior-care living, and the majority of our underwritings were in health care and hospitals. We’ve totally flip-flopped that now.... How many hospitals in your area do you see expanding anymore?” By the end of 1995, Ziegler’s shift into senior living bonds was a fait accompli: it underwrote more than $450 million in retirement facility construction bonds versus only $220 million for its onetime meal ticket, healthcare. But its sales strategies remained the same: send a sales rep to the retirement center and attract the interest of local investors—including the often affluent residents of the retirement centers themselves. In 1997 Ziegler’s Senior Living Finance Group completed 41 financings worth $175 million—making Ziegler the largest senior living facility bond underwriter in the United States.
Ziegler was also undertaking another even more fundamental shift in its business model—stepping gradually but firmly away from its historical image as a “bonds only” house. When some its clients began to take their equity (or stock) investments elsewhere and the stock market boom of the 1990s began generating fortunes for equity brokerages, Ziegler decided to recast its image into a “full-service brokerage.” As John Wagner told Bond Buyer magazine, ’We also realized that to bring the younger client in, you’ve got to do more of the equity side of it and the mutual funds side. You still get their fixed-income business as they mature and age.” In 1994 Ziegler began offering its customers stocks as well as bonds, and in 1997 Ziegler’s Thrift Trading was set to launch the single feature perhaps most emblematic of the democratization of the U.S. stock market in the 1990s: low-commission online trading via the World Wide Web. Reflecting its decision to embrace the equity markets, in July 1997 Ziegler acquired Glaisner, Schiffarth, Grande & Schnoll and its GS;s2 subsidiary, a Milwaukee-based institutional equity sales, trading, and research firm with more than $ 1 billion in managed assets. Dick Glaisner, the acquired firm’s CEO, became the director of Ziegler’s newly organized financial services division with responsibility for its money management and equity sales operations. A newly reconstituted Ziegler securities division would handle the firm’s “capital formation, investment banking and institutional fixed-income [i.e., bond] sales and trading.” In an indication of the early success of Ziegler’s strategy to cover all the investment industry bases, sales of its mutual funds totaled $100 million in 1997.
B.C. Ziegler and Company; GS;s2 Securities, Inc.; Ziegler Assets Management, Inc.; Ziegler Capital Company LLC; Ziegler Financing Corporation; Ziegler Collateralized Securities, Inc.; First Church Financing Corporation; Ziegler Thrift Trading, Inc.; WRR Environmental Services.
“B.C. Ziegler Co.: A 75-Year Niche in the World of Finance,” West Bend News, October 15, 1977, p. 1.
“B.C. Ziegler Company Opens New Office,” West Bend News, April 4, 1928, p. 1.
“B.C. Ziegler’s Unfinished Autobiography Outlines Earliest Days,’West Bend News, October 15. 1977, p. 6. “Bernhard C. Ziegler: 1884-1946,”
West Bend, Wis.: B.C. Ziegler and Company, n.d. Dymale, Nan, “Bernard C. Ziegler,” West Bend, Wis.: B.C. Ziegler and Company, May 1988. “Firm Expanding, Creating New Opportunities,” Main Street Journal, West Bend, Wis.: B.C. Ziegler and Company, December 3-5, 1993.
Roberto, Sondra, “Midwestern Firm Banks Its Future on Senior-Living Centers,” Bond Buyer, July 2, 1996.
“Two Ziegler Brothers Leave Dart to Join Father’s Firm,” West Bend News, October 2, 1972, p. 1.
The Ziegler Story: 1902-1977, West Bend, Wis.: B.C. Ziegler and Company, 1977.
—Paul S. Bodine