Barbarians at the Gate (48 page)

“Let’s go,” Fraidin said when Forstmann relayed the news. There was no reason to stay and try to work with people who treated you like this, the lawyer said. Forstmann would never pull such a stunt, Fraidin added, and he shouldn’t work with people who did. “I don’t want you around here,” the lawyer told him.

Fraidin sounded like a kindly uncle after a playground fight. But after eight years he had developed a strangely protective attitude toward Teddy Forstmann. In many ways his client was naive about Wall Street, Fraidin knew. He didn’t run with people like Cohen and Kravis, and as much as he criticized them, deep down he didn’t really understand them. Forstmann trusted people to be as upfront as he was, and that sometimes led to rude surprises, like tonight.

“Let’s get the fuck out of here,” Forstmann agreed, and made to leave.

Geoff Boisi stopped him. “Hold it, Ted. Eventually we all want to get out of here. But this is a situation that could turn to our advantage. That is, if you’ll stay.”

The Goldman banker had taken note of the chaotic atmosphere, the bewildered faces, the confusing presence of top executives such as Cohen and Robinson. He saw an opportunity in the air of desperation he sensed about the Shearson team.

“These guys are floundering,” Boisi suggested to Forstmann. “If they can’t work out something with KKR, they’re really going to need us. We could dictate our own terms.”

Forstmann was torn. He badly wanted to fight Kravis and show the world the truth about junk bonds. But Johnson didn’t seem to be able to tell the difference between right and wrong, between Forstmann Little and Kohlberg Kravis, and that bothered him.

They waited.

“Well, there’s always a first,” Tom Hill said. “I mean, how many twenty-billion-dollar deals come around? There’s plenty for all of us.”

Kravis, still seething at Hill’s invocation of Jesse Helms, glared at the banker. “We’re not going to do a deal where we give up control. We just can’t do that. That’s the way it works.”

For an hour they swerved from issue to issue, never finding agreement, never mushrooming into outright confrontation. “Well,” Kravis said to Cohen, “what role do you see for yourselves?”

“We’ll do the financing. We’ll do the whole deal.”

Kravis rolled his eyes. “Why don’t you just let us do the deal? You guys can come in as equity partners. What do you care? You’ll get your fair share of fees.”

At one point, Kravis and Roberts asked again about Shearson’s deal
with Johnson. “There’s no sense talking about the management deal until we can work out our deal,” Cohen said.

“How can we cut our deal without knowing your deal?” Roberts shot back. Cohen outlined the deal in the vaguest terms.

They were getting nowhere.

George Roberts attempted a Solomonic compromise. The Shearson group could acquire RJR Nabisco outright, he suggested, then agree to sell Kohlberg Kravis its food businesses. It was a complex proposal involving a maze of tax benefits that took a few minutes to explain. Roberts asked Tom Hill how much Shearson would want for RJR’s food businesses. “Oh, fifteen, fifteen and a half,” he said. Fifteen and a half billion dollars.

“Well,” Roberts said, “we have a problem right there. That business isn’t worth more than fourteen billion.” Cohen and Hill left the room and caucused a few minutes before rejecting the idea out of hand.

And so it went. There was no shortage of matters to disagree on. The question arose, for instance, which investment bank would supervise the posttakeover bond offerings. Besides the return on an LBO investment, “running the books,” or leading, those offerings was the plum assignment for an investment bank in an RJR Nabisco buyout. Kravis saw Drexel, the firm that had created and long dominated the junk market, as the natural choice.

“We’re not going to take a backseat to Drexel,” Cohen said. “That’s not even negotiable.” Not to mention the fact that Drexel was about to be indicted. “Who knows what could happen to them then?” he said.

By three o’clock it was obvious that no agreement would be reached. As Kravis and Roberts rose to leave, Cohen took Dick Beattie aside.

“Look,” Cohen said, “to the extent you have any influence here, we should get together before this gets too crazy. This could get really out of hand.”

As it pulled away from the curb, Henry Kravis’s only thoughts were on strangling Tom Hill. The Jesse Helms remark still incensed him, and no amount of Dick Beattie’s soothing words could calm Kravis down.

“Can you believe that guy, threatening us?” Kravis said.

George Roberts thought Hill was simply one of the worst of a bad
breed. “Knowing Tom Hill,” he said, “you could almost have scripted what he was going to say.”

Johnson couldn’t believe it. In four separate conversations now, Cohen hadn’t been able to reach some kind of compromise with Kravis. What was going on here? A man who prided himself on getting along with anyone, Johnson couldn’t fathom why Cohen was unable to strike a deal, especially at a time when it seemed so vital. Kravis and Cohen were like inert chemicals that exploded when mixed. Having met with him that afternoon, Johnson knew Kravis wasn’t that difficult to deal with.

Johnson listened as Cohen railed about how unreasonable Kravis had been. From the tone of his voice, Johnson suspected Cohen was almost glad the talks had gone nowhere; it gave him an excuse to stiff-arm Kravis and keep the deal for Shearson. Johnson, more worried about his company than Wall Street rivalries, began to have serious doubts about Cohen’s brand of machismo.
Jesus,
he thought,
something is really wrong here.

Johnson’s reverie was interrupted when someone stuck his head into the room and said Ted Forstmann was about to leave.

“Oh my God,” Jim Robinson said. “Teddy’s still down there.”

As Cohen and the others hustled out to head off Forstmann, Johnson and Robinson remained behind. “I feel like keepers of the asylum,” Johnson said.

Inside an office, a pair of Shearson executives, Jeff Lane and George Sheinberg, sat on a desk, talking. Boisi stuck his head in the door.

“I just want to tell you guys one thing. I’ve been in this business eighteen years, and this is the most atrocious behavior I’ve ever seen. It’s
simply outrageous. We will not be treated this way. I simply won’t stand for it anymore.”

With that, Boisi stormed out.

Suddenly, down a long corridor, Forstmann saw Cohen and a retinue of a half-dozen people trotting toward him. The two groups came face-to-face outside the conference room where Forstmann had been cooling his heels for most of the evening.

“Hey, partner,” Cohen said, extending his arms in welcome toward Forstmann. “Let’s go. Let’s talk.”

Forstmann realized instantly what had happened: The talks with Kravis had fallen through, and Cohen now needed Forstmann Little.

For the second time that night, Forstmann wanted to scream. He looked at Cohen and knew exactly what he wanted to say.
You make me sick.

But Forstmann couldn’t leave. It was, he would later reflect, a moment quite similar to ones he had experienced in high school romances. With every girl there was a moment before you broke up when you knew—you just knew—that if you left her right then, you would never make up. Forstmann knew if he left RJR Nabisco’s offices at that moment he would never return. Henry Kravis would gain the biggest prize in history as a result. And nobody would know the truth. Nobody would know the emperor had no clothes. The two groups filed back into the conference room.