Read Barbarians at the Gate Online
Authors: Bryan Burrough,John Helyar
Barbarians at the Gate (86 page)
Roberts didn’t take the news well. “Goddamn, what’s going on here!” he seethed. “We’ve been here since nine-thirty last night, and we’re getting jerked around. We’re being used!”
At Shearson, Cohen’s office was a hive of activity. Tom Hill and a dozen others shuttled in and out. Cohen stood by his desk, puffing a cigar, studying a series of new computer runs. He was ready with a bid number when Nusbaum called. He checked with Gutfreund and Strauss at Salomon, who had closeted themselves in Gutfreund’s art-deco office. All that was needed was Johnson’s approval and, not incidentally, his pledge to further cut the management agreement if the group should triumph.
Cohen passed on both requests to Steve Goldstone at Davis Polk, who relayed them to Johnson at Skadden. When Johnson heard the bid Cohen had in mind, he began laughing. “You can’t be serious,” he said. Thoroughly detached from the action, Johnson approved any amendment of the management agreement that might be needed.
Ten minutes later Cohen got back to Nusbaum.
“Put in this bid,” he said. He reeled off a set of numbers, cash and stock.
Nusbaum nearly choked. “Okay,” he said.
The bid was $108 a share. Twenty-five billion dollars.
Nusbaum’s mind raced. Wanting to bid was one thing; getting the board to take it was another. They had been at Skadden Arps for an hour now and were being ignored. Somehow they had to apply pressure to reopen the bidding. Nusbaum looked at his watch. It was past noon. “They don’t want us here, Peter,” Nusbaum said. “This thing is beginning to smell like a cover-up.”
“If they won’t take a bid,” Cohen said, “we’ll just put something out ourselves.” The board couldn’t ignore a public announcement. A press release had to be drawn up.
Minutes later, Nusbaum dialed Atkins’s office a second time.
“Tell Mr. Atkins,” he told the secretary, “we have a new bid to put in and we’re announcing it publicly.”
Nusbaum thought: Maybe that’ll get their attention.
It did.
Minutes after Nusbaum’s call, Atkins was handed the message in the boardroom. He grabbed Mike Mitchell, and the two men walked briskly out past the waiting area brimming with Kravis’s idle investment bankers and down Skadden’s internal stairway. When they reached the thirty-second floor, they turned right and headed down a hallway. They found Nusbaum standing alone in an office containing nothing but a desk and a phone. There was no chair, no art on the walls, nothing but a nice view of the Queensboro bridge, just two blocks away.
Atkins could tell Nusbaum was nervous.
“Look, I’ve got this letter here, which my litigators have drawn up,” Nusbaum said. “I’ll give it to you, but please disregard it. What I’m really here to say is, here is our bid.”
No one had a pad to write it down. Mitchell fished a scrap of paper from his wallet and jotted down what Nusbaum told him: $84 a share in cash, $20 a share in PIK preferred stock, and $4 a share in convertible debentures. Twenty-five billion dollars.
“I want to emphasize,” Nusbaum concluded, “that everything is negotiable.”
Atkins nodded. As he and Mitchell left the office, they shared a private smile.
“This is going to be a very interesting day,” Mitchell said.
Nusbaum phoned in an after-action report. “I don’t know what’s going to happen,” he told Cohen. “But I think we’ve wedged ourselves back in.”
Outside the boardroom, Beattie was roaming the hallways looking for information. So far there had been no sighting of Johnson or his people, only unconfirmed reports that they were in the building. Beattie collared Atkins as the lawyer returned from talking to Nusbaum.
What are Johnson and Nusbaum up to? Beattie asked.
“Well,” Atkins responded, “we’re going to have to deal with what they’ve given us.”
“What have they given you?”
“I can’t tell you.”
“Come on, Peter, my guys have been here all night. They’re tired of being used. Our best bid is on the table. I’m telling you, they’re going to leave if this thing goes on. And if they do, you know as well as I the other side is free to do whatever they want.”
“I hear you,” Atkins said, disappearing into the boardroom.
That morning Mel Klein and three other Pritzker aides were at La Guardia preparing to board an American Airlines flight to Chicago. When the airline couldn’t seat the four exhausted men together, they decided to take the next flight. Klein walked down to the Admiral’s Club and, with nothing else to do, called Jim Maher.
Maher passed on the news that the bidding wasn’t yet over. Kravis was offering something like $106 a share and looked like he might win. The Pritzker team began to get excited.
Is there an opening? Klein wondered. Can we reach Jay and Tom? Could we up the cash part of our offer?
In minutes they realized they were kidding one another.
“Sorry, Mel,” Maher said, “it’s over.”
It was twenty minutes before one when Atkins returned to the small office where Kravis and Roberts waited. The atmosphere inside was chilly as Atkins spoke. “We have received something, and we can’t live with your one o’clock deadline,” the lawyer said. “We need an extension.”
“Absolutely not,” Kravis said.
Roberts’s reply was equally sharp. “We’re not going to do that.” When Roberts was mad his lips became small and tight, slits on an angry face. “This is outrageous,” he said, barely holding his temper.
“Peter, we’re not going to be diddled around,” Kravis said. “Last night you tell us you’re going to recommend us to the board and we’ve got a deal and everything’s fine. Now it turns out our bid’s being shopped. We’re not giving you any more time.”
Beattie intervened. “Hold it, hold it,” he said. The lawyer turned to Atkins. “Peter, can you give us a couple minutes?”
Atkins left. When the door closed, Beattie spoke to Kravis and Roberts
in a tone he would never use in a larger group.
“George, Henry, just settle down,” Beattie said. “They’re under a lot of pressure. They want to make sure things are done right. And we’re not helping them any here…”
At 12:50 a headline crawled across the Dow Jones News Service. In boardrooms and trading floors across the country, brokers and investors looked up in amazement.
“
RJR MANAGEMENT GROUP BOOSTS BID TO
$108
A SHR
…”
A minute later, Beattie interrupted his speech to Kravis and Roberts to take an urgent phone call. On the line was a Kohlberg Kravis associate.
“They just bid again,” the associate said.
“Who?”
“The management group.”
“What?”
“The management team just went across the tape with a new bid. They’re at one-oh-eight.”
“I don’t believe it. You’ve got to be kidding me.”
“It’s true.”
Beattie hung up and turned to Kravis and Roberts.
“You’re not going to believe this. But the tape says they just bid one-oh-eight.”
Kravis had to sit down. It was the realization of his worst fears, although he had to admit, it didn’t entirely surprise him. Johnson had all night and all morning to assemble a new bid.
Now, twenty minutes from victory, everything had changed.
The auction wasn’t over. The company wasn’t theirs. The world wasn’t fair.
And suddenly they were behind: $108 to $106.
Curses filled the room. “They’re not going to sign us up!” Raether said, one eye on the clock. “Jesus, what are we going to do now?”
Then, as abruptly as their anger flourished, it cooled. It dawned on both Kravis and Roberts what Cohen had done. For the first time in twelve hours, they knew where the management group was. Maybe, they reasoned, they could make this work to their advantage. It would require finesse. No longer could they simply threaten to walk out. They debated
their next move for another twenty-five minutes, then called for Atkins at one-fifteen.
