Barbarians at the Gate (75 page)

“You’re never going to believe this…”

For fifteen minutes Linda Robinson tried in vain to call the phone in Martin’s Range Rover. But the driving storm fouled communications. Finally, just past Mamaroneck, she got through.

Shouts of anguish erupted within the Range Rover.

“We’ve been robbed!” Martin yelled. “We’ve been robbed!”

In the blink of an eye Johnson saw all hope for victory evaporate. “That’s it,” he quietly told his wife. “Good-bye.”

As the reporter finished, Beattie heard the telltale click of another caller on his call waiting. Hanging up, he took the second line, and interrupted Peter Atkins before he could say a word. “Peter,” he said. “Let me tell you what you you’re about to tell me.” He ticked off the three bids and the new deadline.

For the first time in a month, Beattie heard Atkins lose his composure. “Holy shit,” Atkins said. “How did you get that?”

Beattie just laughed.

Jim Robinson, his usual statesmanlike self, attempted to calm the heated rhetoric. Nusbaum tried to put an optimistic spin on events. “Well, obviously we’re in a good position,” the Shearson lawyer said. “The First Boston thing will fall through, and we’ll still be in the lead.”

“I don’t believe it,” Johnson said. “They now know our maximum bid. They know where we are.” No, Johnson told the group, this indicated something far more sinister at work among the board members. “Under no circumstances is the management group going to get this bid,” he predicted. “It’s absolutely clear.”

Johnson was ready to give up and go home. “We always have the option to just not bid again,” he told the group. “Fuck ’em. We’ve done our part.
We played honest with these guys. Fuck it. We’re getting pilloried, pissed on, and every other goddamn thing. Let’s just leave. Let them explain that to the shareholders.”

It was hyperbole. But as he listened to Johnson, Peter Cohen feared he was right. For the first time Cohen began to realize what a liability Johnson had become. Maybe the directors really wouldn’t give the company to him.

“Ross,” John Gutfreund asked, “do you think that that board is really against you?”

“Well, the relationship only goes so far,” Johnson said. The threat of lawsuits tended to spoil even the best friendships. “They’re not against me,” he explained, “they’re for themselves. It’s a pretty big damn difference.”

That afternoon he and Roberts scrambled to learn more details of the First Boston offer. It was a shocker. “Where the hell did these guys come from?” Kravis wondered aloud. At first they couldn’t understand what Maher was up to. Then, as details of the bid dribbled in, Kravis saw how flimsy it was. He couldn’t believe the board had seen fit to give Maher a chance. In his judgment, there was no way First Boston could complete its plan by year end—no way. Still, it had happened, and for that, Kravis would be eternally grateful. He called Roehm and, in a voice filled with relief, told her, “At least we’re alive.”

Late that afternoon Kravis, Roberts, and Beattie gathered in Kravis’s office to ponder their next move. On the face of it, they agreed, they were in a rotten position.

Hold on a minute, Roberts said. He had been giving their plight some thought and wasn’t so sure third place was that bad. In fact, Roberts said, “We’re exactly where we want to be.”

His statement was met with questioning glances.

“Look,” he said. “Let’s just lay low. We’ll put out the word we don’t
know what we’re going to do. It’s the truth. There’s no reason to say we’re really going after this deal. Let’s let the world know we may not be there.”

You’re right, Kravis said, catching on. “The last thing we need to do is go out and beat the tom-toms, especially if we’re not going to bid again.” It made perfect sense: If they were coming back strong in the second round, why let on? And on the remote chance they backed out, why not save themselves some embarrassment?

Roberts smiled as the outlines of a plan formed in his mind. He had the perfect venue from which to launch their little misinformation campaign: Wasserstein and their leak-prone investment bankers. “I think,” he said, “we ought to put on a real show for Bruce.”

The first step was a press release. “We must carefully consider our alternatives,” the firm announced Sunday evening, “in light of new information we will be receiving before reaching any judgment on what further steps,
if any,
we might take.”

When Kravis arrived home, he appeared tired and depressed and talked about giving up the fight. Carolyne Roehm, a woman who believed in female intuition, searched her husband’s face for signs of his true feelings. Did he mean it? Could he really be serious about letting the biggest prey of his life get away?

It just wasn’t like Kravis to scuttle off with his tail between his legs. Underneath the weary words she sensed a new resolve in her husband. No, Roehm decided, there was no way he was letting this one get away twice. She gave it more thought and finally she was sure of it. Henry Kravis had a plan.

The reason was simple: The commercial banks, poised to commit nearly $15 billion or more to the eventual victor of the RJR Nabisco auction, had all but stopped work on every other takeover until their decks were cleared. Most deals were put on hold, as all eyes turned to RJR Nabisco. The information-starved arbitragers, flush against their trading limits, could do little but wait and watch. More than one trader was reminded of an old Western where townspeople cleared the streets so the outlaws could fight.

Wall Street may have been becalmed, but there was nothing calm about the goings-on at First Boston Monday morning. Maher’s troops weren’t simply enthused; they were
pumped.
They had succeeded where no one—not even themselves—had expected. And if they didn’t win it, if they never did another deal, they would never forget how good breaking into this one felt.

By eight o’clock Maher’s top aides had gathered in his glass-walled office to congratulate themselves and prepare for what promised to be a rigorous week ahead. “My friends,” said Greg Malcolm, the junk-bond chief, “the dog has done caught the bus.”

Laughter filled the office. Maher loved it. It was just the kind of esprit de corps the place needed. Especially to tackle this project. He wasn’t sure they could do it. But they sure as hell were going to try.

When the laughter faded, Maher got down to business, parceling out assignments to each of his team leaders. They had just eight days to mount the largest, most complicated takeover bid in Wall Street history. Maher knew it would be the ultimate test of the department’s viability, of whether they could reclaim the top without Bruce Wasserstein.

Kim Fennebresque, Maher’s wisecracking sidekick, would head the team analyzing Nabisco to estimate how much First Boston could get selling Nabisco’s businesses. Brian Finn would free-lance, advising all the groups. Greg Malcolm had the toughest job, leading the financing team. Not only were Malcolm’s people to raise more than $15 billion to buy RJR’s tobacco business at a time most banks were already neck-deep in LBO loans, but he was charged with finding a bank to breathe life into Finn’s installment notes scheme. It was a dicey proposition at best: Nothing like it had ever been attempted. Malcolm had to convince a bank to lend First Boston up to $15 billion against the installment notes it would issue. Everyone in the room knew it was the single hardest task before them.

Afterward Maher strode up to the forty-fourth-floor boardroom, where he was to lunch with Jay Pritzker. Pritzker had flown in from Chicago that morning and seen Jerry Seslowe, his point man on the deal. Seslowe wasn’t surprised to find Pritzker still bothered by the group’s Keystone Kops performance Friday. “Are they just doing this as an exercise to reestablish themselves?” Pritzker asked.

In the boardroom, Seslowe took Fennebresque aside and put the question to him bluntly. “How much of this is being done because you feel you have to be in the game?” he asked. “I don’t want to be embarrassed here, and neither does Jay. I’m out on a limb with you guys. Forget about all the nice words. Are you guys serious about this?” Fennebresque assured him they were. They weren’t in this business to look stupid.

During lunch Maher updated Pritzker on their progress and discussed the values locked inside RJR Nabisco. Mel Klein, the Pritzker aide up
from Corpus Christi, surprised Maher by saying he’d been in touch with his old friend Henry Kravis. “I’m not sure what we’re going to do,” Kravis had told Klein Sunday evening. “We’re trying to make up our mind.”

Everyone at the table wondered if Kravis would drop out of the bidding; his $94 bid was a joke. They theorized that Kravis was tiring of exposure to the gruesome combination of mudslinging, politics, and publicity. Whatever the case, Klein said, he wanted to meet with Kravis to feel him out about a possible partnership. “Listen,” Pritzker told Maher, “we’re not going to do anything you don’t want us to do. We just think we ought to talk with him.”

Maher agreed. He would be more than happy—thrilled, in fact—to split $25 billion of turf with Kravis. “Hey, we want to make an investment here,” Maher told Pritzker. “I’ve got no problem with that. Don’t worry about our position.”

Pritzker had one other message. He wanted the Pritzker name kept out of the headlines. From here on out, he said, chopping the table with his hand for emphasis, the group must always be identified as “the First Boston group.” No one could tell whether the request was made out of altruism or fear of humiliation.

“I really feel badly about it, Ross,” Hugel said. “But there was nothing we could do about it. It had to be done this way.”

“I just think we got the shaft.”

“That’s what the lawyers told us to do,” Hugel said. “We could not turn down an offer potentially worth one hundred and ten a share.”

Nothing Hugel could say would soothe Johnson’s simmering anger. The longer he stewed, the worse he felt. He had been cheated by his own board, people he considered his own friends. Steve Goldstone had been right. They weren’t his friends anymore. He hadn’t wanted to believe it then, and he didn’t want to believe it now. But down deep Johnson knew it was true. He had lost his own board’s support.

Macomber he could understand. He’d long had it in for Johnson. But Marty Davis? From what Johnson heard, Davis had turned the farthest against him. Bill Anderson? Albert Butler? Johnson had taken to calling them the “pseudoindependent” committee. They all had become captives
of their Wall Street handlers, particularly Atkins, the taciturn lawyer Johnson had taken to calling “Laughing Boy.” Of them all, Ira Harris’s behavior hurt the worst. Johnson heard that Harris was badmouthing him on golf tees across the country. He had known Harris for fifteen years. It stung.

By Tuesday Johnson was ready to give up one minute and wring the board’s collective neck the next. In one black moment, he told Laurie to begin cleaning out their company-owned apartment. Together they sorted through their belongings, earmarking some to be moved to Atlanta, some to the Colorado house, some to Florida.

There was little to be done to prepare for the second round. Johnson had been amazed by the $100 number and couldn’t fathom going any higher. “Whatever we do the second time,” he told Jim Robinson, “it certainly can’t be much in excess of what we were looking at the first time around. You may want to mix it up a little bit”—change the cash component—“but in no case should we go much beyond where we are.”

Tuesday afternoon the pendulum of Johnson’s mood swung again. He summoned Goldstone to Nine West with an idea for dealing with the board. “Tell ’em if we don’t get a definitive agreement, we’re walking,” Johnson said. “All the heat’s been put on us, why don’t we put some heat on them? We’re not using the power we have, as a bidder. They’re writing all the rules. Why don’t we write some rules?”

Goldstone knew it was too late to play hardball. The auction was too public, the game had gone too far. He held off calling Atkins, and the next day managed to talk Johnson out of doing anything rash. Wednesday afternoon Johnson packed his bags and boarded his Gulfstream jet for a Florida Thanksgiving.

Monday morning Dick Beattie talked with Bob Millard, the Shearson trader. The two friends had kept up their back-channel dialogue for almost five weeks. Millard was as valuable an intelligence asset as Beattie had. The trader served as Beattie’s—and thus Kravis’s—best read on Peter Cohen.

That morning Beattie sounded as downbeat as Millard had ever heard him. “Congratulations,” the lawyer said, “you guys sure had the best bid.”

The conversation immediately turned to the First Boston “miracle”
bid. “The First Boston thing is clearly a sham,” Beattie said. “We thought about that transaction, and it doesn’t work. It’s a bunch of bullshit.”

Millard wondered aloud what Kravis’s next move might be. Beattie said he didn’t know, and then volunteered to share insights on First Boston’s tax strategy.

“We know a lot about that transaction,” Beattie said. “If we can be helpful on that, we will.”

Millard was struck by the offer and by Beattie’s tone. He sounded beaten. It sounded as if Kravis was all but out of the bidding. Millard ventured a suggestion. “Why don’t you call Peter and congratulate him,” he said. “Just call him. I know he’d love to talk to you.”

A conversation with Cohen, Millard figured, might be invaluable.

“That bid was a winner, Peter,” Beattie said. “I got to tell you, nice job. Terrific.”

“Yeah, well. Thanks. What do you think of the First Boston thing?”

“It’s crazy. It won’t work. We’ve gone through the analysis ourselves. We’re looking at it in another deal right now. They can’t do it. Not by the end of the year. No way.”

“That’s what we think, too,” Cohen said. “We really got screwed. What are you guys doing?”

“Oh, I don’t know,” Beattie said. “Everybody around here’s pretty depressed. I don’t know what we’re going to do about this second-round thing. We may not do anything. We’re all going to take off for the holiday, I think. George is going back to San Francisco. I think Henry’s going skiing.”