Global Crossing - Founding and Early Growth

Founding and Early Growth

Global Crossing was founded by Gary Winnick, Abbott L. Brown, David L. Lee, and Barry Porter in 1997 through Pacific Capital Group, Winnick's personal venture group, which had experienced mixed results in its twelve-year history. In 1997, Global Crossing raised $35 million of capital from the CIBC Argosy Merchant Funds (later Trimaran Capital Partners), the heads of which were former associates of Winnick. Canadian Imperial Bank of Commerce (CIBC) realized an estimated gain of $2 billion from its relatively small equity investment in Global Crossing, making it one of the most profitable investments by a financial institution in the 1990s.

Winnick was chairman from 1997 until 2002. In 1998 he hired Lodwrick Cook, former CEO of Atlantic Richfield Company (ARCO), as co-chairman. John Scanlon became the first chief executive officer in the same year, but was replaced in February 1999 by Robert Annunziata, who had resigned as president of AT&T's Business Services group to "build a company from start to finish". Annunziata oversaw the rapid expansion of the company, including the purchase of Frontier Corp. at a cost of $11.2 billion, the $850 million purchase of Global Marine Systems, and an increase in the workforce from 150 to 14,000. Annunziata resigned in March 2000.

The next CEO was Leo Hindery, another AT&T executive, who had joined the company a few months earlier as head of its webhosting division, GlobalCenter. In March 2000, the month Hindery took over, Global Crossing's stock had reached a high of $61 per share. A month later, it had fallen to $25, and the company's filing for an offer of $2.5 billion in common and convertible preference shares was halved. Many of the original investors sold most or all of their holdings for substantial gains. Hindery predicted that the company would attain a positive cash flow by early 2002, but he resigned in October 2000 after seven months with the company, after the sale of the GlobalCenter division to Exodus Communications. He was replaced by Thomas Casey, a lawyer who came to Global Crossing from Merrill Lynch, where he was co-head of the global telecom investment banking group.

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