Barbarians at the Gate (38 page)

Bruce Wasserstein and Eric Gleacher were brought in and repeated their militant pitches for Roberts. Roberts was less than impressed by the
two bankers’ arguments, although he didn’t say so in their presence. Wall Street, Roberts knew, was full of Wassersteins and Gleachers trying to push Kohlberg Kravis into hasty deals whose chief benefit seemed to be the creation of multimillion-dollar advisory fees. Wasserstein was particularly bad, always pestering Henry with new takeover ideas. Roberts took them all with a grain of salt, lumping them together with everything else he hated about New York. After a while Roberts asked the two bankers to leave the room.

It was an enormous decision. This deal was three times larger than anything they had ever done before. It was also the first time they had launched a bid without the aid of a friendly management team. If they wanted RJR Nabisco, it appeared they would have to fly solo.

Nevertheless, Roberts felt himself slowly bowing to Kravis’s on-the-scene instincts. Isolated in California, he saw it was fruitless for him to second-guess everyone in New York. “Well,” Roberts said. “Let’s sleep on it, then look at in the morning. If neither of us has any real reservations, we’ll go ahead.”

The meeting broke up around 10:15. As Kravis began to think about leaving, Gleacher and Wasserstein walked into his office. “We’d like to talk to you about the fees,” one of them said.

Kravis was irritated by the request. Kohlberg Kravis generally waited until further along in a takeover, even after its completion, before negotiating fees with its investment bankers. Kravis considered it a matter of trust that the firm would take care of its advisers. He cast a stern glance at the two men: little boys asking for a raise in their allowances.

“Why should we talk to you about the fee now?” Kravis said. “We’ve never had any problems with that before.”

The two advisers figured that both Morgan Stanley and Wasserstein Perella should receive a fee of $50 million each. It was an awesome number. The largest fees negotiated to that point had been in the $50 million-to-$60 million range—and those were for deals that required massive bridge loans and billion-dollar capital commitments. Wasserstein and Gleacher wanted the same amount just for their advice.

This is ridiculous,
Kravis thought. Here he was about to launch the largest takeover battle of his career—indeed, in the history of Wall Street—and his advisers were more worried about their compensation than their tactics.

“You’re just not even close,” Kravis told the pair. “We’re not even
going to talk about it. This is the last time we’ll talk about it.”

“Well, fine,” Gleacher said after a moment. “But this is important to us, Henry. We’ll just have to trust you on it.”
*

Later, Kravis took a car home to his Park Avenue apartment. He was pleased by the evening’s events. A tender offer felt like the right thing to do. He was 75 percent sure he would do it. Doubts lingered, of course. How would investors in their funds see it? How would the newspapers play it? Far more important, how would RJR’s board regard it? The directors had to be convinced it was not a hostile bid.

Kravis wanted to sleep on it. In the morning he would talk with Beattie and Roberts, maybe with Peter Cohen.

Then he would make his final decision.

Johnson hadn’t worried about the threat from Kravis. In fact, he hadn’t spent much time worrying about anything since Friday. He had slept until noon Saturday and watched college football all afternoon with Martin. Monday he and Laurie planned to visit Bruce, who still lay in a coma after his accident more than a month before. Tuesday they would meet with the commercial bankers, the first step toward raising the $15 billion or so they needed for the deal. That’s when the real work would start, Johnson figured.

As for Kravis, well, Cohen could take care of him. Kravis would calm down; everything would work out. Cohen said he had things under control
and, until he was informed otherwise, Johnson was inclined to believe him. Anyway, what could Kravis do? He certainly wasn’t going to bid $18 billion for this company without management, Johnson felt.

Jim Robinson wasn’t so blasé All weekend he had agonized over whether to call Kravis himself. Cohen said he had everything under control, but Robinson couldn’t shake the feeling that he might be able to help out. He and Johnson spent much of the evening sorting through options on the phone with Cohen.

Around eleven o’clock, the Johnsons and Martin retired to the Johnsons’ Fifth Avenue apartment, next to the Pierre Hotel. When they arrived, Martin was surprised to find a message from his assistant, Bill Liss. Returning the call, he found Liss near panic.

He had just received a call from a
Wall Street Journal
reporter, Liss explained. “Henry Kravis is going to make a tender offer in the morning at ninety dollars a share.”

Martin and Johnson exchanged bemused looks. “That’s crazy,” Martin told Liss.

“That’s nuts,” Johnson echoed. “Who the hell would pay ninety?”

Takeover rumors, the two men figured. In a deal this size there were bound to be hundreds of bizarre stories floating around. Still, John Martin passed on the rumor to Linda Robinson.

It had been an uneventful weekend. After meeting with Kravis on Friday evening, Cohen had come home exhausted. Saturday he endured six hours of French lessons. Cohen needed the tutelage—he also was taking Italian—for his new friendship with Carlo De Benedetti, because he had recently joined De Benedetti-controlled boards in France and Italy. Cohen assured his tutor he would pursue his studies more diligently than he had the previous spring. “I promise it’ll be different this time,” he said, having no idea it would be his last French lesson for months. Late that afternoon he took in his son’s peewee football game. On Sunday Cohen lay around the house all day. He talked several times with Jim Robinson and Tom Hill. All agreed Shearson should pursue its dialogue with Kravis. Cohen didn’t have the slightest idea where the talks would
lead, but it seemed smart to try and head off Kravis before matters had a chance to escalate.

Cohen’s phone rang. It was Linda Robinson, relaying news of John Martin’s call and the disturbing rumor that Kravis was launching a tender offer for RJR Nabisco.

“I have trouble believing that,” Cohen said. “Someone’s just playing around with you.” Like Johnson, he tossed it off to the usual rumors that accompany any large takeover bid. Linda Robinson thought that sounded plausible.

Less than an hour later, Robinson called again. She had gotten a call herself from a reporter, passing along the same rumor.

“That can’t be right, Linda,” Cohen repeated. “We’re supposed to meet with Henry tomorrow. Why would he do something like that without the benefit of another conversation? It doesn’t make any sense. It’s just rumors.”

For the first time, though, Johnson allowed himself a moment of concern. “Holy Christ, she got a call, too,” he told Laurie after bidding Linda Robinson good night. “This is strange….”

Could it be real?
Johnson thought. No, it had to be rumors. It just didn’t make sense. Hell, he mused, even if Kravis were going to top their proposal, he wouldn’t do it by $15 a share.

Nah, couldn’t be….

At twenty minutes past five Strong slipped into his black BMW 735ii and headed for a nearby newsstand. Twenty minutes later he was cruising toward the Holland Tunnel, a pile of newspapers lying unread on the passenger seat, when his car phone rang. It was a Salomon associate,
David Kirkland. Kirkland had just heard on CBS Radio that Henry Kravis had announced a $90-a-share tender offer for RJR Nabisco.

“Oh, Christ,” Bill Strong said.