Barbarians at the Gate (89 page)

Just as they did, the board broke. A number of directors emerged and headed for the men’s room. Bob Lovejoy, the Lazard banker, meandered over to speak with Roberts and Raether. “I know it’s going slow,” he said, “but we’re getting there.”

George Roberts had had enough. With every bit of anger he could muster, he tore into Lovejoy. “What the fuck is going on! You’re screwing us. We know what you’re doing! You’re down there negotiating with Johnson! I won’t stand for it!”

Stunned by the unexpected onslaught, Lovejoy tried to calm Roberts. “George, you’re wrong. You have my word. We’re negotiating in good faith with you. You’re not being placed at a disadvantage. You’re actually in pretty good shape.”

“It sure doesn’t look like that to me,” Roberts said. “Put yourself in
my shoes. We’ve been here since nine-thirty last night!”

Moments later, Lovejoy beat a swift retreat. “Jesus Christ,” Raether heard him mumble, “I’m sorry I came over here…”

Five minutes later, Lovejoy sought out Kravis and Roberts in an empty office. He had Felix Rohatyn in tow. Clearly Roberts’s speech had had an effect.

“We’re not negotiating with Johnson,” Rohatyn assured Roberts calmly. “We’re just trying to understand where he is. We’re just getting clarification.”

Fuming, Kravis and Roberts sat back to wait. Again.

By seven o’clock Johnson had had enough. He asked Goldstone whether he was needed. When the lawyer said no, Johnson’s group prepared to go to dinner at one of Horrigan’s favorite restaurants, Scarlatti, on East Fifty-second. Before leaving, Johnson called John Martin, who remained behind at Nine West.

What are our chances? Martin wondered.

“They’re not going to give it to us,” Johnson said.

Minutes later, Johnson emerged from the building’s lobby into a gaggle of television cameras.

“Who won?” reporters shouted. “Who won?”

“The shareholders,” Ross Johnson said, not missing a beat.

At a urinal, he found himself standing side by side with the young Kravis associate, Scott Stuart.

“So how’s it going in there?” Stuart asked.

Hugel’s first impulse was to throw up his hands—Who knows?—but to do so might have caused an embarrassing accident.

“Don’t worry,” Hugel said, “it’ll be over soon.”

The board reconvened at ten past six. Luis Rinaldini ran down their progress with the management group. In general they agreed to what the board sought, with one major exception. Cohen and Gutfreund refused to put a reset on their bid’s securities, fretting that it would lock them into guarantees that could cost them tens of millions of dollars. They insisted instead that Shearson and Salomon would use their “best efforts” to guarantee the securities traded at their stated values.

Felix Rohatyn summed up the situation for the board. “We have one-ten-plus with a problem on the reset versus one-oh-eight. But without that reset, one-ten starts to erode. I’m not sure that either firm [Lazard or Dillon] is ready to give you an opinion that the management offer is ahead.”

The directors discussed going back to the management group on the question of a reset one final time. Rinaldini called Jim Stern. One last time: Would the management group consider installing a reset? Stern refused.

Even before hearing Shearson’s answer, Atkins & Co. had resolved to give Kravis the same chance to make a final bid they had given Nusbaum six hours earlier. Around the table, the drawn and gaunt directors hoped Kravis would make this easier for them. As Atkins led a procession out of the room, John Medlin had a final word for him. “Tell them,” he said, “we need another dollar of cash to tilt it in their direction.”

As Atkins and his group entered the corner office, Kravis sat on a rattan sofa, tired, poker faced, right hand propping up his head. Roberts sat beside him, lips stretched tight across his face. Above the cousins’ heads hung a giant blue Marlin, the trophy of some lawyer’s summer vacation. Raether and three Kohlberg Kravis associates, flanked by Beattie and Cogut, lined the walls. An aquarium filled with multicolored fish burbled to one side.

The board, Atkins said, was willing to give Kohlberg Kravis one final opportunity to bid. “If you haven’t already done so, this is the time to put in your best bid.”

Silence.

Kravis and Roberts were too startled to speak. Beattie and Cogut exchanged a glance of amazement.
One final bid? Hadn’t they been through this five hours ago?

Felix Rohatyn’s voice filled the void.

“This is a serious offer. You should do your best to respond to it.” Then, looking Kravis square in the eye, Rohatyn said: “We want your highest and last offer.”

“This is the craziest thing we’ve ever seen,” Kravis said. “We gave it to you five hours ago!”

Kohlberg Kravis has two conditions before it will place its final bid on the table, Beattie said. First: A merger agreement must be drawn up and submitted to directors as part of the offer. “Because we want this to end,” Beattie explained. Second, and most important, Kravis and Roberts wanted the board’s promise that, if they bid, neither Johnson nor any member of management would be allowed into the final board meeting.

“We’re not going to give you another offer if it’s going to be reviewed by a board that includes Johnson or anyone in management,” Beattie said.

“Why not?” Atkins asked.

“Peter, for obvious reasons. Ross’ll just stand up and bid again.” Cogut chimed in: “If we say
X,
he’ll just say
X
plus one. He’s always got the last bid.”

Atkins had to admit they had a point. This was something he hadn’t thought of. Assuring the two lawyers he would get back to them, Atkins walked off to find some help.

Five minutes later, Atkins closeted himself in an empty office with Mike Mitchell and Dennis Block. The trio was among the most experienced on Wall Street. But this one had them stumped: How do you uninvite a chief executive to his own board meeting?

“It’s clear to me you can’t just exclude him,” Block said. “What do we do?”

Law books were pulled down from shelves and thumbed through, but an answer evaded them. Johnson seemed to have every right to attend the meeting. Holding the meeting without him invited a lawsuit. “There’s no way we can keep ’em out,” Mitchell said.

The minutes ticked by.

Could he be fired? Too messy, they decided.

Atkins was growing desperate. The fate of the entire $25 billion deal hung in the balance.

Then, suddenly, Mitchell asked the obvious question: “Why don’t we ask them if they plan to attend?”

It was so simple. Maybe Johnson wouldn’t want to come. Atkins found Goldstone in a hallway. Giving no hint of why he was asking, the Skadden lawyer explained that the board was set to meet and choose a victor.

“Will your people be there?” he asked in an offhand manner.

“Wait a second,” Goldstone said. “We’ll check.”

Goldstone returned minutes later with a question. “Will KKR be at the meeting?” he asked.

“No.”

“Well then, no, we don’t plan to be there unless KKR will be.”

Atkins heaved an inner sigh of relief. Unwittingly, Goldstone had just laid the groundwork for Kravis to boost his bid one final time.

No one bothered to ask Johnson whether he wanted to attend his final board meeting. By then Johnson and his aides were into their first round of drinks several blocks away.