Read Barbarians at the Gate Online
Authors: Bryan Burrough,John Helyar
Barbarians at the Gate (46 page)
Johnson disagreed. With the $90 floor established by Kravis, shareholder value had already been served. Now, he said, it was important to make sure this bidding contest didn’t get out of control, that it didn’t get to the point where the debt they piled on would make it impossible to run the company.
Horrigan didn’t want to hear any more about consorting with Kravis. “They’re the enemy,” he had said. “I don’t see how we can work with them.”
Now, as they went around the room one by one, Horrigan again decried Kravis and his methods. Staying with Shearson was the right thing to do, no matter what the chances of victory. “You go home with the guy who brung you,” Horrigan said. “We win with Shearson or we go out with Shearson.”
The others—Henderson, Ed Robinson, Sage—agreed. “Look, we’re in. We’re with you,” John Martin said. “We picked our partners and we’ll stay with ’em.”
The crisis had passed. When the group adjourned, Johnson summoned Cohen. “I know you had some doubts about us,” he said. “You made a very generous offer to free us up. I appreciate that. I just want to reaffirm that we’re with you.”
Cohen was clearly gratified. “I appreciate the vote of confidence. Let me tell you, we’ll stick with you to the end.”
At the height of the evening’s chaos, Ted Forstmann arrived on the forty-eighth floor. The moment he emerged from the elevator, Forstmann had a bad feeling. The place was crawling with people. Most of them seemed to be lawyers. Forstmann groaned.
Too many cooks….
Forstmann had brought along his brother Nick, his lawyer Steve Fraidin, and Geoff Boisi of Goldman Sachs. They, too, noticed the disorder. Boisi, accustomed to dealing with investment bankers, was puzzled to see senior executives such as Cohen and Robinson darting about.
Who’s in charge here?
he wondered.
The Forstmann group was escorted into a windowless conference room dominated by a single cherry table and packed with more than a dozen lawyers and investment bankers. Johnson was there, as was Cohen. Immediately the Shearson troops began pelting Forstmann with questions, most of them variations on a single theme: How do you fight Henry Kravis? Forstmann brushed the questions aside. There was no sense in talking about that, he explained, until they were sure they were on the same wavelength. For at least the second time that day, Forstmann launched into The Spiel.
First came the denunciations of Kravis. No junk bonds. No bridge
loans. Forstmann was gathering steam when he noticed Johnson duck out. No hostile tender offers, he continued. None of that crazy shit. On and on he went. After a bit Cohen followed Johnson out the door. “I don’t fuck around,” Forstmann concluded. “We don’t say yes to many things. But we’re there on this one. Are you there?”
Forstmann looked around. Suddenly it struck him that the conference room had emptied. Only three of the original group remained. As Forstmann scratched his head, a junior Shearson banker began suggesting ways that junk bonds could be wedded to Forstmann Little’s goals without sullying the firm’s moral views.
Forstmann was annoyed. Hadn’t this guy heard anything he’d said? Hadn’t he bothered to read the article in
The Wall Street Journal
that very morning? Didn’t he know who he was talking to? “Wait, wait, wait,” Forstmann said in exasperation. “You guys don’t understand. I don’t do that stuff.”
Then, distracted, he paused. “Where did everybody go?” he asked.
No one knew. When the remaining Shearson bankers left, Forstmann wasn’t sure what to do. He waited. For more than an hour there was no sign of Johnson, Cohen, Jim Robinson, or Tom Hill. Geoff Boisi began to get mad. “Something funny’s going on here,” he warned.
All evening Cohen had been trying to reach Kravis. It was important, he and Johnson agreed, to send a message back to him that his $125 million “bribe” was entirely unsatisfactory. John Martin suggested a dead fish might get the idea across. Cohen left messages at Kravis’s apartment. He called Dick Beattie: Did Beattie know where Kravis was? The lawyer knew, but he wasn’t telling Cohen.
As they spoke, Kravis was in fact enjoying a lavish black-tie dinner at a nearby restaurant, La Grenouille, given by the agent Swifty Lazar for Henry Kissinger. There he chatted with Felix Rohatyn, the Lazard banker now working with Charlie Hugel’s special committee, and with Salomon’s John Gutfreund. The room, of course, was abuzz with gossip on the RJR Nabisco deal. Gutfreund sat at Kravis’s table, smiling to himself as his tablemates quizzed the diminutive financier. Not once did Gutfreund let on that Salomon was on the verge of joining the battle against Kravis. His dinner chatter with Kravis was limited to a comment about Kravis’s newfound press exposure.
“I think,” Gutfreund said, “this is the first time I remember a financial guy has been on the front page of
The Wall Street Journal
and
The New York Times
in the same day.”
Henry Kravis smiled; he didn’t much like John Gutfreund.
After dinner Kravis returned to his apartment and waited for Cohen’s call. From his library window he could see the forty-eighth floor of Nine West ablaze with light.
They’re still up there,
he thought.
At 12:15 the phone rang. It was Johnson.
Johnson’s normally ebullient air was gone. “Henry, I’m disappointed in you,” he said. “That’s a lousy offer you made to them. I thought you were going to be fair. That wasn’t fair at all. That’s not right.”
There was still room for a dialogue, Johnson explained, but not on those terms. If Kravis had something better to propose, he was still welcome to do so.
Kravis wasn’t surprised. Beattie’s intelligence, as always, had been on target. “Fine,” Kravis said. He was in no mood for a debate. “If that’s the way you feel….”
Johnson put down the phone and looked at Goldstone. The two men were seated in the anteroom just off Johnson’s office. Cohen hovered outside the door.
Goldstone wasn’t pleased with his client’s performance. Johnson’s personality simply wasn’t built for confrontations. The guy was too cheerful for his own good.
“Ross, look, if you’re intending to give the message to Henry that you’re not going to switch sides here, you didn’t give him that message,” the lawyer said. “I think you should call him again and give him the message more clearly.”
“Maybe I didn’t make it clear enough.”
“I think that’s right,” Goldstone said. “It sounded kind of vague.”
“Maybe I ought to call him back.”
“Yeah, I think you ought to.”
Five minutes later Johnson phoned Kravis again.
“Henry, maybe I didn’t make one thing clear. Let me tell you I’m staying with Shearson. I don’t want you to think in any way we’re not
partners. You can’t expect me to abandon the people that are my partners.”
Kravis wondered why Johnson was calling a second time. Someone was pulling Johnson’s strings, he decided. He wondered who was really in charge of the management group.
“I wouldn’t expect you to,” Kravis said. “Ross, let me make one thing clear. Nobody’s given a thought to splitting you two. That’s not what we’re about.”
It was a lie, more or less. But this was no time to alienate Ross Johnson. Kravis hung up, worried, and quickly conferred with George Roberts and Dick Beattie. Rejection of their offer was not good, not good at all. A $90-a-share tender offer looked fine in the papers. But Kravis was acutely aware that he had never made a major takeover bid without the analytical help of a management team that knew its company inside and out. He didn’t like to admit it, but one thing was clear: He needed Ross Johnson. Besides, a bidding war at these levels could cost the winner billions of dollars. Kravis and Roberts agreed a second approach was called for.
Kravis dialed Johnson at Nine West. After a minute Cohen came on the line.
“Peter, I think it’s probably good for us to talk,” Kravis said. “You know we’re not trying to split you up. I just think we should talk about this.”
Fine, Cohen said. Let’s talk.
“Why don’t we meet in the morning?”
“No, if you want to meet, let’s meet right now.” Cohen didn’t mention that he had Ted Forstmann cooling his heels in a back room.
“Peter, it’s twelve-thirty at night….”
“No, if you have something to say, say it now. Tomorrow might be too late.”
Kravis called Dick Beattie minutes later.
“They want to meet.”
“What time tomorrow?” Beattie was ready for bed.
“Tonight.”
“Tonight?”
Beattie pulled on a light jacket, walked out of his Fifth Avenue apartment and hailed a cab. On the way he picked up Roberts at the Carlyle Hotel, then Kravis at his Park Avenue apartment. The cab made good time
moving through the empty streets. When the trio pulled up outside Nine West, they were surprised to find a long line of limousines parked outside.
