The elder Smidt accused his son of kicking him off the board of directors and looting Harbor Freight in part to buy the Knoll, a painting for $100 million and a Manhattan apartment for $20 million. Eric Smidt denied the allegations -- in a statement reported in local media at the time the company called them “completely unfounded” -- and the case was settled out of court.
At 57, he’s now one of the richest residents of Los Angeles. He started out anything but. His mother had multiple sclerosis and his father, overwhelmed, sent him to an orphanage when he was nine. Four years later he went to live with an aunt in Tennessee, returning home after two years but moving into his own apartment on his 16th birthday.
“His childhood is such a dramatic story,” said Michael Govan, CEO of the Los Angeles County Museum of Art, to which Smidt and his wife Susan pledged $25 million in October. “He’s a role model not just for the fortunate and wealthy but also for those who grew up with nothing.”
Smidt has difficult memories. “It’s so blurry, that part of my life,” he was quoted as saying in the Los Angeles Times on Oct. 28, 2016. “It was very hard. I was very angry and miserable.”
That didn’t stop him from going into business with his father. After he left high school, the pair converted the family’s telephone-sales operation into a direct-mail outfit selling imported industrial supplies and tools. That became Harbor Freight, which today has more than 750 locations nationwide. Since 2016, a new store opens roughly every three days.
The younger Smidt was the driving force behind the success, Greif said. “He’s his dad on steroids.”
Breakneck growth has enabled Harbor Freight to periodically increase debt levels and then deleverage through steady earnings increases, Moody’s Investor Service said in a research report in August.
Greif said that for Smidt, “who’s having the time of his life and has no plans to retire,” leveraging makes perfect sense. “If you have a business that’s minting money, as Harbor Freight is, then doing dividend recaps until the cows go home is a no-brainer. A private equity firm would leverage the company in any event, so why not do it yourself and still call all of the shots?” And the extra spending money can come in handy.
This article was provided by Bloomberg News.