For Morgan Stanley & Co., cup maker is just another investment

To find out who really owns Maryland Cup, look past th company's sprawling factory in Owings Mills. And look past its nominal corporate parent, Sweetheart Holdings, whose headquarters is an eight-person office (including secretaries) in Stamford, Conn.

Instead, look to Manhattan, to a steel-and-glass office tower on the western edge of Rockefeller Center. That's the headquarters of Morgan Stanley & Co., a publicly traded international investment firm.


Morgan Stanley, which made millions as an adviser on mergers and other deals involving Maryland Cup, has moved far beyond that role. Today, Morgan Stanley counts the cup maker as part of a huge portfolio quietly assembled over the past decade.

Since the mid-1980s, amid the boom in leveraged buyouts, Morgan Stanley has acquired major interests in companies with assets estimated at $25 billion -- a scope exceeded only by the largest and best-known U.S. corporations. These holdings, which are constantly shuffled, have spanned the corporate spectrum, from textiles (Burlington Industries) to packaging (Owens Illinois) to consumer products (Waterford Wedgewood). Until recently, Morgan Stanley even had a major interest in the Seattle Mariners baseball team.


Its relationship to Sweetheart is complicated. Morgan Stanley directly owns 14 percent of the cup maker. An affiliated Morgan Stanley investment group owns an additional 22.4 percent, and Sweetheart executives whom Morgan Stanley appointed hold 13.7 percent. That's a total of 50.1 percent. Morgan Stanley and its affiliated investment group also control about three-quarters of Fort Howard Co., which, in turn, owns nearly half of Sweetheart.

The result: Morgan Stanley has direct and indirect influence over almost 90 percent of Sweetheart, which is technically a private, independent company.

That relationship began a decade ago -- and has provided a stream of fee-generating deals, according to Securities and Exchange Commission filings.

From the initial Fort Howard-Maryland Cup merger in 1983, Morgan Stanley reaped $2.6 million. Three years later, Morgan Stanley earned an additional $2.6 million for advising Fort Howard to combine Maryland Cup with another cup maker, Lily-Tulip.

In 1988, Morgan Stanley and affiliated investors acquired Fort Howard in a $3.9 billion leveraged buyout -- and the fees were grand. For organizing the deal, Morgan Stanley collected $40 million. Other perks included a $1 million-a-year, five-year contract for financial advice and underwriting fees for Fort Howard securities.

Morgan Stanley's perspective on the cup business changed as soon as it took charge. Shortly after the buyout of Fort Howard, Morgan Stanley split off the cup operations. It named the new company Sweetheart Holdings, after the brand name that Maryland Cup made famous.

Today, operational control of Sweetheart is a commuter ride away from Morgan Stanley, at the Connecticut office of Sweetheart's top executives, D. Greg Horrigan and R. Philip Silver. The two keep a low profile, operating out of an anonymous office building.

Appearances, however, can be deceiving. With help from Morgan Stanley, the two have assembled an industrial empire in just five years.


Besides Sweetheart, they oversee Silgan Corp., created from former subsidiaries of Nestle, Monsanto, Dial and other companies. It is one of the nation's largest producers of metal and steel containers. If you buy pet food, peanut butter or salad dressing in a supermarket -- or soda at a fast-food chain -- it probably comes from a company they run.

Combined Sweetheart/Silgan sales approach $1.5 billion, about the midpoint among the Fortune 500.

Not too long ago, Mr. Silver and Mr. Horrigan were senior $H executives of Continental Can Co., a major packaging company based in Stamford. That company, like Fort Howard, was acquired during the 1980s and was reconfigured, leaving the two executives victims of the change. They responded by joining the trend.

"We wanted to be in control, where it wouldn't be jerked away," said the 48-year-old Mr. Silver, adding that further moves may be forthcoming. "We are not ready to play golf and fish."