Richard Heckmann is one of a growing number of investors who believe they've been cheated by a special class of Chinese company, one that gains access to U.S. capital markets via a reverse takeover, or RTO.
Heckmann's story demonstrates that even experienced investment professionals have been flummoxed. At 67, Heckmann is based in Palm Desert, California, in an office building on Frank Sinatra Drive. His specialty is the roll-up: the building of a big company through the feverish acquisition of smaller ones that share a focus. His pay day comes when the roll-up is sold to a major corporation for a heroic sum.
Heckmann made his first millions while still in his 30s, with a roll-up in the field of medical devices. In 1990, he began consolidating hundreds of local water-purification plants into what would become U.S. Filter. Nine years later, he sold that company to Vivendi for $8 billion. He then took control of K2, the ski-equipment company, and used it to hoover up a slew of sporting-goods brands, until he had something he could sell to Jarden ( JAH) for $1.2 billion. All of which is to say that Heckmann didn't fall off any truck. He stepped down from a Gulfstream. "I can't believe they got me," he says. By the time he formed his special purpose acquisition corporation, or SPAC, in 2007, Heckmann was enraptured with the investment idea that has captivated the rest of capitalism: the vast, rapidly growing markets of China. It doesn't take a Warren Buffett to understand the macroeconomic fact of China's 1.5 billion people and the double-digit GDP growth year after year. The lure is ancient. Ever since Marco Polo journeyed overland from Venice in the 13th century, Westerners have sought to crack open and exploit the vast commercial potential of the Middle Kingdom. Even now, Heckmann rhapsodizes. "It's such an electric place! There's so much growth. It is so obvious what's going to happen there." Heckmann saw the potential of a nation with an average per capita income of $4,300 -- "imagine what happens to that economy when they get a middle class!" He says his first visits floored him, the infrastructure in the big cities so spotless, efficient and high-tech it looked sci-fi. The frenetic pace, the go-get-em energy of the people, China as the most explosive wealth creator since the end of feudalism. Miss out and you lose.