Barbarians at the Gate (51 page)

Ushered into Forstmann’s office, Cohen strolled about, inspecting its motley collection of art, family photos, and books. Forstmann realized Shearson’s chairman was sizing up the place. As a chance to make new friends, the gathering was a failure. Forstmann, impatient to join the fight, spent much of the time preaching against Kravis. Strauss thought Forstmann would never get off the soapbox.

Geoff Boisi was also there. Tom Hill had passed his suspicions about the Goldman deal maker on to Cohen: Boisi and his people had shown a keen interest—too keen, Hill thought—in obtaining confidential information about Nabisco businesses. Hill didn’t know about Boisi’s contacts with Procter & Gamble and others, but suspected the Goldman banker had other interests at work than strictly advising Forstmann. Already Hill had directed his people not to share too much of their data with their Goldman counterparts.

For his part, Cohen hadn’t appreciated Boisi’s bullying style during their first meeting on Tuesday. Now he quizzed the banker about his job as Forstmann’s adviser. When Boisi seemed to equivocate, Cohen realized Hill could be right: Boisi might be playing along just to get his hands on information that would aid a Goldman-led bidding group.

Cohen and Strauss left Forstmann’s office that day deeply suspicious of Geoff Boisi’s motives.

From the car phone he dialed Forstmann, waking him from a sound sleep. It was time to talk to Cohen. “We better let this guy know absolutely that they’re not treating us correctly,” he told Forstmann. “This guy’s looking at you as financing. He uses the word
partner,
but he doesn’t know what being a partner means. It’s time they know how you treat a partner.”

Cohen was at home, pulling on his overcoat and heading for the front door when the phone rang. He jogged into the kitchen to get it and immediately heard the steel in Boisi’s voice. “Teddy doesn’t have to do anything here, Peter,” he said. “Unless this thing starts going in the right direction, we can just walk away…. You know, you’re losing this guy. Don’t be sitting there thinking he doesn’t have any alternatives, because he does. We are perfectly capable of helping him.”

“What are you saying?”

“I’m saying we have alternative courses of action here if we don’t do this deal with you.”

“Whoa, whoa,” Cohen said. “You have alternative courses of action? What does that mean?”

Cohen knew exactly what that meant. Hill had been right: Goldman wanted to make a run at RJR Nabisco itself. To Cohen, the Goldman banker was a mole attempting to insinuate himself into the upper reaches of Shearson’s strategists. Cohen, in his own words, “went nuts.”

“Listen. We don’t need you,” he told Boisi. “We don’t need Teddy. We don’t need anybody! We can go our own way, too, you know…. We’ve shared all our data, all our secrets, with you. Now you’re telling me you have alternative courses of action? That’s absolutely one hundred percent contrary to what you have told us to date.”

Cohen hung up knowing it wouldn’t be the last heated exchange he would have with the Goldman banker. Later that morning, Cohen called Forstmann, who was due at Shearson only a few hours later.

“Who are you going to bring down?” Cohen asked.

Forstmann ticked off his brother, Boisi, and Steve Fraidin, the owlish lawyer.

“Can’t we do it without Boisi?”

“Gee, Peter, he’s our adviser, you know.”

“Well, all right, if you have to. But I don’t need to get any more phone calls from this guy. I don’t like the way he talks.”

Cohen was still fuming when the Forstmann group arrived at Shearson that afternoon. They took seats in its sumptuous nineteenth-floor library, and turning to Boisi, Cohen came right to the point. “I want to know whether you guys have signed the confidentiality agreement,” Cohen said. “Are you free to go out on your own? Otherwise, I don’t know how you can be sitting here in this room with us.”

No, Boisi said, neither Forstmann Little nor Goldman has signed any such agreement. But Boisi assured Cohen he had no intention of divulging any of Shearson’s secrets. “Peter, you have my word on that.”

“I want to hear that from a lawyer.”

Boisi stiffened. “Let me understand, Peter. You’re saying my word isn’t good enough?”

“I just want to hear it from a lawyer.”

Cohen turned to Fraidin, who sat on a couch across from him.

“Hey. Lawyer.”

Fraidin, who was taking notes, didn’t seem to hear him.

“Hey you. Lawyer. I’m talkin’ to you.”

Fraidin, blinking through his professor’s glasses, looked up. He knew Cohen was trying to intimidate him. “Are you talking to me? What’s the question?”

“Does the confidentiality agreement permit you to make an offer separate from management’s?”

Fraidin was silent for a moment. When he spoke his tone was calm. “I have two answers. First, I am not your lawyer. I would not presume to give you legal advice. You should ask your own attorneys that question. Ask Jack Nusbaum. He’s a fine attorney. As regards the other, I have advised my client, of course, they are free to pursue another venture.”

Cohen showed no reaction. A minute later he excused himself and left the room.

Forstmann couldn’t believe the exchange. “
Hey you, lawyer?” Who does this guy Cohen think he is? Little tough guy with that big cigar. A psychiatrist would love this guy.

It was clear to Forstmann that Cohen was confused. Forstmann Little had signed a confidentiality agreement with RJR Nabisco barring it from divulging any of the company’s secret data. There was no such agreement
with Shearson, nor with any member of the management group. Nor would there be.

Cohen returned several minutes later with a set of photocopied computer runs. This is how we think a Shearson–Salomon–Forstmann Little offer would look, Cohen said, handing Forstmann a copy of the document.

Forstmann leafed through it, but the numbers inside meant nothing to him. Everywhere he looked there were junk bonds, page after page of gobbledygook. Somewhere among the figures he found Forstmann Little’s $3 billion sandwiched between layers of junk bonds. It made his skin crawl.

It got worse. It was clear Forstmann Little didn’t control the bidding group, and the Shearson proposal seemed to contain clause after clause whose sole purpose was blocking that from ever happening.

Cohen could tell Forstmann didn’t like what he was reading. “Don’t think this is a hard-and-fast proposal,” he said. “We’re perfectly willing to accommodate you on this.”

Forstmann was shaking his head. This won’t work, he said. He tried to make Cohen understand that, under Forstmann Little’s guidelines with its investors, the firm would end up controlling the bidding group. A full 37 percent of every Forstmann Little deal was promised to its lenders. Another 10 to 15 percent was sold to management. Even if they split the remaining 53 percent, Forstmann and his backers would have majority control. Guidelines preventing that made no sense. “No hard feelings, Peter, but this just won’t work.”

“That’s all right,” Cohen said. “We’ll just rework it.” He got up and left the room.

When Cohen left, Forstmann turned to Boisi. “Geoff, what can we do about this? We can’t even talk about this. You can’t turn chickenshit into chicken salad. There’s nothing to negotiate. You know? They just don’t get it.”

The four men caucused. Maybe, they agreed, Forstmann ought to propose his own capital structure to Shearson. Forstmann thought it was a great idea. Besides, he was worn out from forty-eight hours of nonstop analysis. He rose and went looking for Cohen. He found him down the hall, chomping a cigar in a smoke-filled boardroom. Lawyers and investment bankers clad in shirtsleeves lined the walls.

“Peter, look, this is impossible,” Forstmann said. “I’m exhausted. I’m
going back uptown. We don’t even have a starting point here. Let us put something together and send it down to you.”

Cohen agreed.

Outside, Forstmann and Boisi climbed into the backseat of Forstmann’s black Mercedes. The two were already deep in conversation as the car pulled into traffic on the West Side Highway. Suddenly Boisi noticed Forstmann’s eyes widen. Forstmann saw the oncoming car and wanted to yell,
Geoff, duck!
but it was too late. The Mercedes shuddered as a car plowed into its left rear end.

No one was hurt in the fender bender, but the other driver had no insurance. They waited for what seemed like hours for a policeman to arrive. It just didn’t seem like Ted Forstmann’s week.

Clad in corduroy slacks and a sports shirt, Gutfreund boarded a helicopter arranged by Shearson and arrived at Salomon’s lower Wall Street headquarters in fifteen minutes. There he was met in the boardroom by a pair of advisers, Peter Darrow, his lanky longtime lawyer, and Mike Zimmerman, a fast-talking Salomon investment banker. In their hands were copies of Johnson’s management agreement.

“You’re never going to believe this,” Zimmerman said.

Gutfreund took a copy and read it. He was startled. The agreement was far more lucrative than Cohen had hinted. If he was interpreting it correctly, Johnson’s seven-man group was entitled to $1 billion, maybe more, free of charge. Darrow ran through the agreement with Gutfreund, point by point. It was important they realize what they had gotten themselves into.

Arriving at Shearson a half hour later, Gutfreund didn’t wait long to bring up the management agreement with Cohen. “I am going to have an enormous amount of difficulty, and we as a team will have an enormous amount of difficulty, unless that package can be reworked at a lower level,” Gutfreund said. “Peter, it’s just
unseemly.
”

“John, I promise you, it will be dealt with,” Cohen said. But, he added, it made little sense to revise the pact until they had a better sense of what levels the bidding might rise to.

Relieved, Gutfreund agreed. It could wait.

Teams of Shearson and Salomon bankers worked late into the night Friday and all day Saturday. Both firms mobilized traders and salesmen in London and Tokyo in the scramble to obtain funding commitments from an array of foreign banks. Another team, led by Jim Stern, was attempting to construct a compromise capital structure acceptable to Forstmann.

Cohen spent much of Saturday looking for Forstmann. He called his office and his home. Forstmann was at lunch; then he was out during the afternoon. Cohen knew he was getting the messages. All week Forstmann had bugged him to move faster, always faster. Now, when he was needed most, he couldn’t be found. Cohen guessed Forstmann was trying reverse psychology, playing hard to get.