Barbarians at the Gate (59 page)

Cohen wasn’t looking forward to seeing Kravis again; for some reason he couldn’t seem to shake his head clear. He called Jim Robinson. “Whatever you’re doing,” Cohen said, “drop it. Come on up and meet me at Nine West.”

Next Cohen called Jeff Lane. Shearson’s number-two executive hadn’t been deeply involved in the RJR drama so far, for he had his hands full running the company in Cohen’s absence. Now Cohen needed him. “I’m really worn out here,” he told Lane. “I may not be thinking as clearly as I should. I need someone with a fresh head.”

By nine o’clock a small group had reassembled in Johnson’s offices. Only Gutfreund and Strauss made up the Salomon contingent. Kravis and Roberts showed up a few minutes later, ready to talk. Cohen suggested they return downstairs to their own offices until Johnson turned up. When Johnson hadn’t arrived fifteen minutes later, someone called his apartment and discovered he was still asleep. Around nine-fifteen Cohen went down to Kravis’s offices, so tired he could barely see straight, and found Kravis and Roberts with Dick Beattie. At breakfast, Peter Ackerman had offered to back out of the deal if Kravis wished. Kravis wanted no such thing. Asked for a compromise, Ackerman came up with something he thought Gutfreund could live with. The bond offerings would be split: Drexel would head the first portion, with Shearson on the right, and Salomon would head the second, also with Shearson on the right. Similar ideas had been batted around the night before, but Kravis thought it sounded reasonable.

Cohen tried his best to listen, not sure he fully understood the proposal. Less than a half hour later he returned upstairs to explain Kravis’s compromise to a group that now included Jack Nusbaum, Jim Robinson, and Steve Goldstone. Johnson still hadn’t shown up. When Gutfreund and the others began questioning him about Ackerman’s plan, Cohen found himself short of answers.

“Look, I give up,” Cohen wearily told the group. “Maybe somebody else can crack the code here. Maybe somebody else should go down and see what you can do.”

Jeff Lane and Jack Nusbaum were chosen to make the second sortie. Downstairs Kravis sent the pair into another room and had Ted Ammon explain again the compromise he had in mind. Kravis was alarmed. Lane and Nusbaum didn’t seem to have the slightest grasp of what they were talking about.

Robinson hadn’t been asleep for more than three hours. When her head hit the pillow at six
A.M.,
she had hoped the deal would be struck by the time she woke up. She called Kravis and was passed through quickly.

“How’m I doing, coach?” Kravis asked.

“I don’t know, Henry,” Robinson said sleepily. “It’s nine-thirty in the morning. What’s going on?”

“We just had a meeting. Things went okay, but we couldn’t really tell.” Kravis was fishing, Robinson figured.

“I don’t know what happened,” she said, “but I’ll find out and call you back.”

Linda Robinson put down the phone, then called the group at RJR Nabisco. Kravis insisted on keeping Drexel in the deal, she was told, and the talks were collapsing. Everyone was blaming it on Kravis.
Oh, no,
Robinson thought.

She called Johnson. He was still at home and knew nothing about the rapidly deteriorating situation at Nine West. Johnson was a late sleeper, and hadn’t let a $20 billion negotiation change his habits. “Things sound really bad,” Robinson said. “They’re way off track.”

Finally she called Kravis back. “Everybody is really mad. What the hell went on when you met with our guys?”

“Your guys were really tough.”

“Well, they say you were backsliding on all this stuff.”

Johnson could always tell when someone was trying to get a rise out of him. Cohen, it was clear, wanted him mad at Kravis. Confused and growing angrier by the minute, Johnson took a seat in the large conference room where the group was debating how to handle Kravis. Mostly they seemed to be cursing him.

They’re trying to take the whole deal! We’re getting fucked! They’re fucking us! They’re fucking us!

It made no sense to Johnson. As best he could tell, it all boiled down to who got the most fees. When he asked questions, the answers came back in Wall Street gobbledygook that only made the issues more difficult to comprehend. Half the time Johnson couldn’t tell if he was supposed to be upset. “I just bloody don’t understand what the problem is,” he said.

Strauss tried to explain that splitting the bond offerings would be a logistical nightmare. “Goddamn it,” Gutfreund railed, “what they’re looking for is preposterous. We should just go out on our own. We’ll never be able to live with these people.”

Disgusted, Johnson retreated to his office. He wanted no part of what he viewed as trivial arguments. He couldn’t believe the agreement would fall apart over something as silly as which bank would run a bond offering. People shuttled in after him, complaining that the deal wasn’t working. Johnson grew testy.

“This is all horseshit,” he snapped. “Nobody gives a shit about the company. Nobody gives a shit about the employees. Jesus, we’ve got a goddamn company to run. I’ve got 140,000 people to worry about. We’ve got to get going!”

As the morning wore on, Johnson waited for something—anything—to
happen. The peace treaty couldn’t fall apart. It just couldn’t. This too, he figured, would blow over.

Inside the fishbowl, matters deteriorated quickly. If Kravis insisted on using Drexel, they agreed, there would be no joint deal. If there was no deal, it was time to bid. It had been ten days since Kravis announced his $90 offer, Gutfreund and Strauss argued, and still the management team had no bid. They proposed to immediately loft a $92 counterbid.

“It makes us real,” Strauss argued. “We need to be penciled in as a player. We need a bid on the table.” The price got no argument from Cohen or Jim Robinson. Of those present, the only serious opposition came from Steve Goldstone.

To Goldstone, it was clear what this tactic was about: It was what traders called a “fuck you” bid. Simply put, Cohen and Gutfreund were so mad at Kravis they wanted to shove an offer right in his face. Goldstone silently cursed these men and their giant egos.

He stood beside the great table and denounced the idea of a new bid, his voice rising as he spoke. He had been pleading with Atkins for a merger agreement, promising that management would come through with a blockbuster bid. If Shearson bid $92, he said, that argument would be moot. A $2 bump wouldn’t bust many blocks. Once a bid was out, they lost their leverage with the special committee. Atkins and Hugel would know they had management on the hook and would pull for all their worth.

“This won’t scare Henry off,” Goldstone argued. “Henry won’t walk away from this thing. It will only infuriate him. All you’re doing is pissing off Henry and losing our leverage with the special committee. We’re throwing away our strategic advantage. It’s a wasted bid.”

Gutfreund didn’t think much of Goldstone’s argument and said so. Ross Johnson may write the check, Gutfreund suggested, but it was still Salomon and Shearson’s bankbook. “It’s not your money,” he snapped. “We know how we’re going to proceed.”

For several minutes Goldstone and the Salomon executives locked in a heated discussion of bidding strategy. Goldstone wished Tom Hill, who was in Minneapolis for a Pillsbury board meeting, were there to add heft to his argument. Finally Goldstone’s partner, Dennis Hersch, leaned over and whispered into his friend’s ear.

“Hey, cool it,” Hersch said. “They’ve made up their minds. You’re not their counsel.”

Goldstone stormed around the corner into Johnson’s office. Spitting mad, he briefed Johnson on the situation, adding that the bankers were prepared to launch a counterbid. “It’s a serious, serious mistake and it’s going to hurt us,” Goldstone said. “But I can’t stop them. They’re completely hostile. They’re not listening to me.”

Johnson listened as Goldstone went on about Gutfreund. Still he remained unconcerned. This was a negotiation, and all negotiations get heated. Sooner or later, he told himself, they would calm down.

“We appreciate your negotiating in good faith,” he said. “We both tried to cut a deal. Everybody worked hard. We seem to have problems that can’t be overcome. If you can’t move off that point, there’s no point in discussing this any further. We’ll have to go our separate ways.”

Kravis was nonplussed. “What’s the response to our proposal that we gave to Peter this morning?” he asked.

Robinson was every inch the diplomat. It just wouldn’t work, he said, not going into details. Then he dropped the bomb.

“We’ll be submitting an alternate bid,” Robinson said. “We’re putting it on the tape right now.”

“What?” Kravis said, amazed. As far as he was concerned, they were still in negotiations. “Why?”