Barbarians at the Gate (50 page)

Strauss beat a retreat as fast as he could. Gutfreund was still holding on the other line.

Here he had channeled several major projects to Salomon in recent years, and Strauss wouldn’t give him the time of day. Strauss wouldn’t even afford him the courtesy of a call before entering battle against him.

Kravis tried to put it out of his mind. He had more important things to worry about. His tender offer would officially begin the next day,
Friday. It wouldn’t be long, Kravis knew, until Cohen and Johnson regrouped and put their own bid on the table. When that happened, Kravis would have to be ready to bid higher. Before he did, he needed to know a lot more about Johnson’s company. And without Johnson in his camp, Kravis remained at a severe disadvantage. What he needed was someone who knew RJR Nabisco. A wise man.

A few days earlier he had taken a call from Jim Walter, founder of a Tampa company Kravis had acquired in 1987. Walter sat on the board of Anchor Glass with Tylee Wilson and suggested to Kravis that Wilson might be of help analyzing RJR Nabisco. Kravis hesitated; he didn’t know Wilson. But as the week wore on and the chances of joining forces with Johnson diminished, he changed his mind.

He now dialed Wilson in Jacksonville, Florida, where the former RJR chief had moved after his ouster. “Oh, I know he’ll want to talk to you,” Wilson’s secretary said, promising that the executive would return the call immediately.

Minutes later Wilson ducked out of an American Heritage board meeting to return Kravis’s call. “Maybe we could get together,” Kravis said after introducing himself. “It could make sense.”

“That’s great,” Wilson said. A meeting was arranged for Friday morning at ten o’clock.

But now Bagley was mad. As the grandson of R. J. Reynolds and the owner of more than 1 million shares of RJR stock, he saw himself as the inheritor of the Reynolds family mantle. Damned if he was going to sit by and watch Ross Johnson steal the company his family worked so hard to build. Wednesday afternoon Bagley strode around his lawyer’s office, waving his arms and violating the dignified hush of Arnold & Porter’s Washington office.

“Those little bastards; those little
managers,
” Bagley shouted. “This
little guy could take the company from the shareholders to make all that money for himself. That money belongs to the shareholders. It’s so
wrong.
We have to do something.”

But what? Until now, Smith Bagley hadn’t exactly taken an active interest in the company. He had grown up in Greenwich, Connecticut, a few doors down from Ted Forstmann’s family. He hadn’t cared much for Winston-Salem, which he considered a cultural backwater. For much of his life, Bagley had steered clear of the business world. His experiences in it hadn’t been pleasant; in the seventies, he headed a company named Washington Group, but it wound up in bankruptcy proceedings and Bagley, in court, charged with stock manipulation. Acquitted, Bagley became a philanthropist, active in the affairs of foundations that used the proceeds from their RJR stock. He had been president of the Z. Smith Reynolds Foundation. He was also vice chairman of the Democratic National Committee’s finance committee and, as such, in the thick of the final weeks of the Dukakis presidential campaign. Johnson’s power grab couldn’t have come at a worse time.

But Bagley was determined to derail him. It was, he felt, his duty as a Reynolds. His mother, Nancy Reynolds, R. J.’s third child, had cared deeply for the company long after severing formal ties to it. In the early seventies she had fought a proposal to take “Reynolds” out of the company name, writing letters to board members that said, in effect, “Over my dead body.” In the mid-1980s she pressured Tylee Wilson’s people to publish an authoritative company history that had been gathering dust for twenty years. Some had thought the book a bit
too
authoritative and suppressed it, but Nancy Reynolds lived to see it published in 1985, the year she died.

Like his mother, Bagley made it a point to get together with the company’s reigning chief executive from time to time to talk. He had lunched with Tylee Wilson about once a year and liked him. After a year of trying to arrange a meeting, Bagley had finally met Johnson at the Democratic National Convention that summer. He wasn’t impressed. “That bastard,” Bagley cried now. “He moved the company to Atlanta and now he’s cashing out.”

But what to do? Bagley had already conferred with a lawyer in Winston-Salem about blocking the LBO legally, but was told he had a better chance of organizing a competing bidding group. Now he sorted through the possibilities with Arnold & Porter lawyers. RJR Nabisco employees
and retirees held maybe 5 percent of the stock. Could they be rallied into an anti-Johnson block? Possibly, the lawyer said. What about the family? Reynolds family members controlled another 5 to 8 percent. The idea of marshaling those shares into a family-backed bid appealed to Bagley, although he knew it would never happen. Aside from the dabblings of Bagley and his mother, the family hadn’t been active in the company’s affairs for decades.

Bagley didn’t want the company sold at all, although he confessed to mixed feelings as he watched the stock soar. But if it were to be sold, he wanted it to be at the best price for shareholders, not at the best price for Johnson. In that regard, Johnson’s publicly disclosed flirtation with Henry Kravis was downright scary.

Bagley had met Kravis years before and had a favorable impression of him. If he could bring Kravis the imprimatur of the Reynolds family and the aid of a man who knew the company inside and out, could he forestall a sweetheart deal with Johnson? It was a long shot, but Bagley had little to lose.

He returned to his office and quickly got through to Kravis in New York. What are you up to? Bagley wondered.

“Well, I’m doing some work with the family company,” Kravis said, and they agreed to meet for breakfast on Saturday in New York.

Next Bagley called his friend Tylee Wilson in Jacksonville. “Look, we’ve got to get involved in this,” Bagley said. “Would you have any interest in seeing me and my lawyer?”

Was Tylee Wilson interested? The man who had sat atop a $15 billion corporation now ran two things: a one-man consulting firm and a faltering marina. For two years Wilson had taken phone calls from his old corporate allies whispering about Johnson’s latest escapades. It galled Tylee Wilson to see that breezy playboy trashing a fine American company.

Wilson had come to rationalize his sacking as a principled refusal on his part to play corporate politics with the board. “I wouldn’t kiss their ass in Macy’s window,” he told friends. He had used a portion of his severance pay to buy a new boat he named
The Integrity.
Now the folly of installing Johnson had been laid bare. It gave him some grim satisfaction. It would give him a lot more satisfaction to ride back in, the man given up for dead, and save the kingdom from this corrupt reign.

Was Tylee Wilson interested? So bad he could taste it.

“How about tomorrow?” he asked Bagley.

Bagley agreed. There was just one logistical question.

“Will you have a limo?” Wilson asked.

“Ah, sure,” Bagley replied.

Bagley and his lawyer flew to Jacksonville the next day, arriving
en limo
at six. Wilson greeted them in shirtsleeves and a tie and, it being cocktail hour, asked if they would like a drink. A few minutes later, Kravis called to say he would send a jet for Wilson in the morning. That night the two men dined at Wilson’s club, and Bagley got an earful from RJR’s former chief. Wilson went on and on about the waste under the Johnson regime: The words
appalling
and
sickening
were used a lot. “It’s a great company with great traditions that’s being run down,” he said.

“Kravis needs you as a credible manager,” Bagley said. “You could give him the management, and I could give him the family. We could beat Johnson.”

An alliance was formed. That night, Bagley returned to Wilson’s house, where Tylee’s wife, Pat, joined them. Into the night they drank and swapped old Reynolds war stories. Wouldn’t it be great, they mused, to strap on the guns again.

“Where the hell could this have come from?” he asked Roberts. Neither man had a clue. As far as they knew, Wilson was already on a jet heading north. The airplane pilot, maybe?

Kravis and Roberts were still puzzling over the leak when a call came in from Charlie Hugel. Kravis put him on the speaker phone. Hugel had just read of Wilson’s hiring, too.

“Henry,” Hugel said, “if you’re really going to do that, let me tell you one thing. Don’t. If you do, everybody will quit. They’ll go right out the door. If you’re worried about management, there’s a lot of good people in this company. I’ll even help you find them. But you’re making a big mistake hiring Tylee Wilson.”

Kravis thanked Hugel for the tip. Later that morning he and Roberts met with Wilson for two hours. They found his knowledge of the company outdated and his zest for revenge apparent. The leak, they concluded, had come from Wilson himself.
Leaks!
Kravis was sick of them
and wanted no part of a chief executive who wasn’t. When Wilson left, Kravis and Roberts quickly made up their minds to wash their hands of the man. Tylee Wilson’s career as a Kohlberg Kravis consultant was over before it started.
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