Billionaire Nicolas Berggruen is always on the move, looking for the next deal

November 5, 2011

Nicolas Berggruen can’t sit still.

At the poolside restaurant of the Hotel Cipriani in Venice, the billionaire investor glances at the lunchtime crowd drifting over from their sun loungers. He fidgets. Polishing off a cappuccino, he suggests we move.

Berggruen selects a pair of wicker sofas on a patio outside the hotel bar. “It is better here, no? A little cooler,” he says. Five minutes later, he decides we are too close to a boisterous group. So we move again, this time to a table tucked discreetly into the corner of a deserted veranda.

Berggruen, 50, lives his whole life this way, always on the move, as he seeks out companies to buy, from Berlin to Bangalore to Brisbane. For the past decade, the dual American and German citizen has had no fixed home address. He roams the world on his Gulfstream IV jet, living out of five-star hotels. Most of the time, he carries only a small tote bag containing clothes and his BlackBerry.

“If you have things and if you are a perfectionist, which I am, you have to really tend to them, and it takes energy away from other things,” says Berggruen, whose pink shirt, monogrammed with his initials in red on the pocket, is fraying at the cuffs and collar.

The son of a wealthy art dealer, Berggruen parlayed a trust fund worth about $250,000 into a fortune of at least $2.5 billion. Over three decades, the investor has gotten rich by tapping his worldwide network of business contacts to find mostly small, beaten-down companies to buy, expand and sell.

Berggruen has also made money with four blank-check companies: shell companies that go public and then use cash or shares to acquire an operating business.

The eccentric investor has stumbled plenty too, particularly when taking detours from his buyout specialty. A foray into hedge funds produced lackluster results before he chucked the venture. And several investments in faddish businesses such as ethanol were a bust. “You make mistakes,” Berggruen says. “You learn.”

Now, Berggruen is moving even farther afield in a quest to save the West from sinking into chaos. He says the stock market swoons of 2011, the brinkmanship in Washington over the debt ceiling and the euro-zone debt debacle are symptoms of the same underlying problem. “What you really have is a deep, deep governance crisis in the West,” he says.

To reduce the political paralysis that threatens the United States and Europe, the billionaire donated $100 million to create the Nicolas Berggruen Institute, with offices in Berlin, Los Angeles, New York and Washington.

In September, the institute assembled a group called the Council for the Future of Europe. It includes former government leaders Gerhard Schroeder of Germany and Felipe Gonzalez of Spain; former European Commission president Jacques Delors; and economists Nouriel Roubini, Joseph Stiglitz and Mohamed el-Erian, chief executive at Pacific Investment Management. Former British prime minister Tony Blair has served as an adviser.

In public statements from Brussels, the group called for greater political integration within Europe. That includes the centralization of some fiscal policy, wider powers for the European Central Bank and European Financial Stability Facility to restructure the debt of private banks and the issuance of joint euro-area bonds to relieve the sovereign debt crisis.

Berggruen says his aim is to help experts reach agreement and then lobby to turn their proposals into policy.

“In Europe, all the experts say you need more integration, but the public doesn’t buy it yet,” says Nathan Gardels, a senior adviser to the Berggruen Institute. “So their job is really to resell the vision of an integrated Europe to the public.”

Berggruen seamlessly slips between the worlds of politics, finance, art and Hollywood. He flew to the island of Borkum in the North Sea, where Schroeder was vacationing, to talk to him about the European initiative. Schroeder then helped recruit other former heads of state for the project. “We got them one by one,” Berggruen says.

Berggruen grew up under the influence of the art world that made his father, Heinz, rich. Heinz was a Berlin-born German Jew who fled the Nazis for San Francisco in 1936. While there, Heinz wrote in his autobiography, he worked as a curator and art critic and had a brief affair with Mexican artist Frida Kahlo.

Art collection

After World War II, he settled in Paris and, as a dealer, amassed one of the world’s most significant collections of works by Paul Klee and Pablo Picasso, says Andrew Strauss of Sotheby’s. Before he died in 2007, Heinz donated 90 works by Klee to the Metropolitan Museum of Art in New York and sold more than 100 paintings by Picasso, as well as works by Alberto Giacometti, Henri Matisse and Klee, to the Berlin State Museums for the below-market price of $120 million.

Growing up in Paris and attending school in Switzerland in the 1970s, Berggruen was passionate about politics. At 17, he worked as a trainee for Robbie Rayne, then investment director of a buyout firm known today as LMS Capital.

“He was very bright and much more serious than most people his age,” he says.

He enrolled at New York University in 1979 and got his undergraduate degree in business in two years. In 1985, he founded a company to manage his investments and the small family trust.

Today, Berggruen Holdings has offices in Berlin, Istanbul, Mumbai, New York and Tel Aviv and nine senior executives who help the founder find investments and manage them. The firm owns more than 30 companies, from real estate to furniture to health care. Berggruen is financing skyline-shaping towers around the world, including designs by Pritzker Architecture Prize winner Richard Meier.

He also bought German department store chain Karstadt Warenhaus out of bankruptcy in 2010 for the symbolic price of one euro. The investor provided the business with an $83 million cash infusion and promised to spend $552 million over five years to revive the brand — his highest-profile corporate rescue to date.

Berggruen, who says he negotiates many of the buyouts himself, looks for companies loaded with debt or with family owners who are looking to retire. The firms also need to have strong cash flows and defensible business models. After restructuring the company’s debt and investing in expansion, he’ll often hold it for a decade or more before selling. He says that he rarely fires rank-and-file workers, because his goal is to increase revenue. But he does typically shake up top management.

“It is always a question of finding the right people,” he says. Berggruen is never one of them. “I discovered pretty early that I am probably a terrible manager.”

Berggruen has had more success managing his own money than other people’s wealth. In 1988, Berggruen co-founded Alpha Investment Management in New York. The firm grew to about $2 billion under management before the founders sold it for an undisclosed sum. By then, Berggruen had soured on Alpha. “In reality,” he says, “the business made me manage the capital worse, not better, because if you have outside money to manage, you have to be much more careful.”

Two years later, as the stock market’s bull run was nearing its peak for the decade, Berggruen moved to cash in. He and business partner Martin Franklin set up Freedom Acquisition Holdings, a blank-check company that went public in December 2006. It raised $528 million. The next year, Freedom bought British institutional investment manager GLG for $4.15 billion.

“This is a bit like big-game hunting,” Berggruen says. “You look for companies of a certain size that deserve to be public.”

Long before dabbling with blank-check companies, Berggruen had made enough money to buy all of the trappings of the ultra-rich: a Fifth Avenue apartment in Manhattan, a mansion on a private island near Miami, the Gulfstream IV and artworks by Damien Hirst, Jeff Koons and Andy Warhol. Berggruen says that living amid all that luxury turned into a burden and didn’t make him happy.

“I understand the human instinct to want to create a nest and possess things, to show them off,” he says. “For me personally, it became less and less interesting.”

So in 2000, Berggruen sold his houses, put his art collection in storage and gave away or sold most of his possessions. He says his decision to live a rootless existence wasn’t a means of dodging taxes; he says he pays them in the United States.

Wealth-sharing pledge

The investor, who signed a pledge promoted Warren Buffett and Bill Gates to donate at least half of their wealth, says he’ll give away all of it eventually. “Everything I do now is about growing the pot to have more to give away,” he says.

Berggruen has poured his earnings into projects to solve the world’s problems, and they have sometimes gone astray, such as an investment to reduce world hunger. In 2008, Berggruen announced a plan to buy 24,700 acres of land in Latin America and Southeast Asia and turn it into farms to increase food production. He discovered what any farmer could have told him. “There are a lot of variables out of the control of the people in the business, meaning commodity prices and climate and land issues,” he says.

Berggruen is also pushing for governance reform in California. With the state struggling with a $27.6 billion budget shortfall and cutting welfare programs for children, Berggruen last year brought together a panel of boldface names.

Google Chairman Eric Schmidt, billionaire Eli Broad, former governors Gray Davis and Arnold Schwarzenegger and former U.S. secretaries of state George Shultz and Condoleezza Rice formed the Think Long Committee for California. The group will call for giving more power to local governments, reforming the ballot initiative process and broadening the state’s tax base. Berggruen has promised to spend $20 million to back the Think Long Committee’s proposals.

“Twenty million dollars gets a lot of people’s attention,” Broad says.

Back at the Hotel Cipriani in Venice, Berggruen’s BlackBerry buzzes. “I really need to go,” he says. He has another meeting. Then, tomorrow, it’s back on the Gulfstream IV.

The full version of this Bloomberg Markets article appears in the December issue.

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