Why Should White Guys Have All the Fun? (30 page)

Buying back the shares from his fellow shareholders brought Lewis’s stake in McCall from 81.7 percent to about 88 percent. Despite his affection for the firm, Lewis realized that the only remaining way to realize a truly significant return on his investment was to sell the pattern company.

“He clearly wanted to cash out,” Kevin Wright says. “If you’re a buyout group, you don’t fall in love with any business. When you’ve made enough, you cash out and let somebody else take the risks inherent
with that business. So, toward the end of 1986, Reg was verbalizing that he felt it was time to go home on this one.”

Along the way, we pursued a lot of different alternatives in terms of raising the equity. We did a sale-leaseback transaction. We also paid out our bank debt in less than 18 months. We brought in some equity at a reasonable price, but also gave our investors a tremendous return in an 18-month period. We pursued an acquisition of the Butterick Company. We pursued an acquisition of the Simplicity Company. We tried to take the company public. We talked about a recapitalization with Bankers Trust. None of those things worked—well, the sale-leaseback worked, but some of the other things didn’t work
.

I was reading Tom Wolfe’s
The Right Stuff
at the time and felt almost like a jet pilot: I’ve tried A. I’ve tried B. I’ve tried C. Well damn, maybe I should die like a man or something. In any case, business turned up and by December of 1986, two years after the deal, we had $23 million in cash on our balance sheet. That was about $20 million up from what we had when we acquired the company. And we had increased earnings from $6.5 million of operating to roughly $13 million or $14 million. The rest of fiscal year 1987 looked pretty good, also
.

At that point, Earle Angstadt came down to my office and we had kind of an interesting meeting. He said, “Reg, I just may not be able to be with you for the next few years.” He wanted to spend more time with his lovely wife, among other things. I said, “Okay, Earle, then in that case it’s time to go.” From there we did a $19-million recapitalization that resulted in impressive shareholder return in December of 1986
.

All these factors pushed Lewis in the direction of a sale. He decided that an auction would be the best way to sell McCall and retained First Boston to handle the auction. He then got together with McCall’s executives to prepare an offering document. It was completed in January 1987, and sent to about 80 prospective buyers.

Lewis was leaving McCall a revitalized company. He had strengthened its balance sheet and led it to the two most profitable years in its history.

“Reg comes in and extracts the highest profit margins they’ve ever had,” notes Howard Mackey, a client from Lewis’s attorney days. “I always wondered how he managed to do that from a law firm at 99 Wall Street. That is some testament to the way he managed things and managed people.”

The auction ended in June 1987 when a British textile manufacturer, the John Crowther Group, bought McCall for $65 million, nearly three times what Lewis paid for the firm three years earlier.

I signed the contract with Trevor Barker of Crowther to sell McCall for $65 million, right on the heels of our recapitalization for $19 million. I sold to the bidder we thought was best for the Company—a publicly-held British concern—at a price of roughly $63 million, plus $2 million for our expenses
.

TLC had also managed to keep the real estate, which was easily worth another $6 million to $10 million and we’d also gotten some other dividends, so all in all that was about $90 million on our original investment of $1 million, and it was all in cash. And not only that, we felt that we were leaving the Company in excellent shape because the new buyer was putting up $30 million and had some plans for what he wanted to do with it. I was feeling pretty good
.

The name of the game is return on investment. After three and a half years, an investor in a “TLC deal” could surely smile with justifiable satisfaction. The closing was consummated on June 30, 1987. We signed the contract about June 15th. Rather than try to take Crowther up from $65 million, I said, “Okay, close in two weeks.” I traded cash for speed and we got it done very fast
.

When Lewis told one of McCall’s directors, Lee Archer, about the price that had been paid for McCall, Archer actually laughed out loud. “What idiot would pay us $65 million for a company when it’s in the record that we only paid $22.5 million,” Archer asked incredulously. Lewis just smiled broadly.

On June 30, 1987, Lewis was seated in a conference room with Earle Angstadt and about 20 other people when the voice of a female vice president at Bankers Trust came over the speaker phone, “The funds have been irrevocably transferred.” Angstadt sprang to his feet, uttered “Good night, gentlemen,” and bid Lewis and McCall adieu. Lewis had made Angstadt a wealthy man.

“As far as his business acumen is concerned, if I had had his financial smarts, I would have taken over the company without him,” Angstadt says. “But I didn’t. I was never a student of the things he mastered.”

An elated Lewis and his closest associates went to the Harvard Club where a party was held in his honor. Just the mention of the name “McCall” was enough to make the jubilant Lewis break into a wide grin, but in a couple of years his sale of the sewing-pattern manufacturer would spawn a litigious nightmare that would keep a perpetual scowl on Lewis’s chiseled face.

Lewis would emerge victorious from the litigation but the experience would not leave him unscarred. He would always look back on McCall and his 90-to-1 gain as his “best work.” Soon this feat would be much publicized—a development that benefited Lewis greatly in the long run.

The financial media have the power to move markets, create fortunes, and make or break careers. Less than a year had passed since the abortive McCall IPO, and Lewis remembered well the cooling effect that a
Wall Street Journal
article had exerted not just on McCall but on the entire IPO market. Lewis read the financial press avidly and respected its influence, but he was no fan of the media, per se. Prior to acquiring Beatrice, Lewis had been content to operate in relative obscurity because he didn’t need the press to accomplish his objectives, nor did he feel any burning desire to be in the spotlight. And frankly, he wondered about the motives of the Fourth Estate.

Lewis’s wariness of the press became even more pronounced after the sale of McCall. Not long afterward, Lewis was in the study of his home reading newspapers very early one morning. As he was flipping through
The New York Times
, a piece about the new McCall president and CEO, Bob Hermann, caught Lewis’s eye. The headline read, “McCall Pattern’s Head Pleased by New Owner.” The story opened by saying, “The McCall Pattern Company has been through several leadership changes that were not all good for its business. But being sold to its new
owner, a British company called the John Crowther Group, ‘is probably the best thing that ever happened to us,’ said Robert L. Hermann.”

Already Lewis’s trademark furrow was working its way across his brow. Here was Hermann trying to steal his thunder, and doing so in a newspaper distributed around the globe. Lewis didn’t know exactly how, but he intended to steal his thunder back.

This was the same Hermann who, in Lewis’s view, wanted to take McCall down a discount-pricing path that wouldn’t have generated the same spectacular financial results McCall enjoyed under Lewis’s leadership.

But on another level there was something else about the
Times
article that bothered Lewis: Namely, the history of this country is replete with instances where noteworthy accomplishments by African-Americans have been glossed over, modified, or totally ignored by whites. Lewis was determined not to let Hermann do the same thing to him.

By now Lewis’s rugged features had scrunched into a full-blown scowl. He folded the newspaper with irritation, strode out of his study, and awakened his wife to show her the offending article.

“Goddamn that Hermann,” he exclaimed. “You see? They’re rewriting history already. They’re just going to overlook the fact that McCall prospered under my leadership!” This injustice would have to be rectified immediately. Lewis looked at the story again to locate the reporter’s byline. Finding the offending scribe to be one Daniel F. Cuff, Lewis called directory assistance. There couldn’t be more than one or two Daniel Cuffs in the phone book. Lewis got a number and punched it into his phone.

Members of the press like to perceive themselves as totally objective and free of biases, but ultimately
USA Today, The New York Times
and ABC
News
are all comprised of individuals harboring the same kinds of prejudices and pet peeves as anybody else. Not surprisingly, awakening a reporter at 6
A.M.
is not a good way to ensure totally fair and objective coverage in the future. Any ill will that might result from calling Daniel Cuff early in the morning was the least of Reginald Lewis’s concerns.

Loida Lewis got involved in her husband’s spin-control project later that day. A
Wall Street Journal
reporter she knew recommended someone who might be able to assist Reginald Lewis—one Rene S. Meily.
Meily, who uses the name “Butch,” was working at his desk at Burson-Marsteller, one of the country’s top public relations agencies, when the phone rang in his Manhattan office. Loida Lewis was on the line, telling Meily that her husband had a public relations problem. She briefly outlined the matter with
The New York Times
and Daniel Cuff. Could Meily help out?

Meily got to work immediately, arranging a one-on-one interview between Lewis and Cuff, whom he knew. Lewis and Meily were to meet in the lobby of
The New York Times
that same day, then go upstairs to see Cuff. Meily was already in the lobby when Lewis arrived, wearing a dark, tailored business suit. After a handshake and a brief exchange of pleasantries, Lewis got right down to business. He talked about the upcoming interview and asked if Meily had any advice on how Lewis should handle himself. “Be yourself. You seem to know what’s going on and how to handle yourself,” Meily replied. “Stick with that.”

When they met with Cuff, Lewis was at his most charming. The early morning phone call that day was most unlike Lewis, he assured Cuff. Nor had Lewis meant to unsettle Cuff or offend him in any way. Once finished smoothing Cuff’s feathers, Lewis segued into a masterful capsulization of his ownership of McCall and how the deal had benefited his shareholders so handsomely. The interview with Cuff went well, although Lewis didn’t think so. He said as much to Meily in no uncertain terms after they’d gotten into Lewis’s chauffeur-driven car in front of the
Times
’ entrance on West 43rd Street. “He was so nervous that he was really going at me in the car. I don’t even remember over what, but I think he was upset over a couple of things,” Meily says. “That was the first time I saw his temper.”

A low-key, mild-mannered man with a knack for understatement, Meily notes that the episode in the car “may have set the tone for our relationship.” Meily would later become the public relations person for TLC Beatrice and was the frequent target of vociferous verbal attacks from Lewis. Other TLC Beatrice executives welcomed Meily’s arrival when an angry Lewis was venting his displeasure over some matter, because Meily would stoically endure the storm until the energy had been spent. “You don’t take the temper stuff too seriously, you handle it well,” Lewis later told Meily. “You’re almost like a lightning rod sometimes for me.”

However, Lewis also recognized that Meily excelled at the business of spin control. A few days after
The New York Times
interview, Cuff
authored an article that described Lewis’s stewardship of McCall in glowing terms. The piece noted that “Mr. Lewis, 44, is an intense lawyer who is likely to call an associate at 6
A.M.
to deal with a problem.” The headline for the story was “90-to-1 Return for Investor,” which was the primary message Lewis wanted to get out. Lewis was justifiably proud after that article hit the newsstands. “He was ecstatic,” Meily remembers. “He was quite sensitive to every nuance. He read and reread that article to see how it was slanted and if it was slanted. He was quite sensitive to how he was perceived.”

Lewis was so delighted that he worked out a retainer arrangement with Meily’s employers that made it possible for Meily to do public relations work for Lewis on a regular basis.

The 90-to-1 piece, which also included a picture of Lewis, represented the first time he used the media to do his bidding. There were several occasions when he and his team took copies of the article with them as they met with executives and financiers who could help them purchase and operate Beatrice. While Lewis remained wary of the media, he saw they could be a useful tool if manipulated properly.

About a week after the
Times
piece, Lewis received a congratulatory letter at 99 Wall Street from one of his high school classmates, William Smith. An Army dentist stationed in New Jersey, Smith wrote in part, “Accomplishments such as yours serve to fuel the aspirations and dreams of your people. Now that the mantle of leadership has once again been thrust upon you, it should be comforting to know that others are elated to have you wear it. Keep on achieving, my Brother.”

Lewis, who was busy plotting his strategy for acquiring Beatrice at the time, took time to respond:

July 27, 1987

      
Colonel William Smith, Jr.
Headquarters US Army Dental Activity
Mills Dental Clinic
Fort Dix, New Jersey 08640