Barbarians at the Gate (56 page)

They agreed to meet at the Plaza. When Johnson relayed news of the meeting to Jim Robinson, the American Express chief insisted that Cohen be included. It just wouldn’t do, he suggested, for Cohen to see his boss and his boss’s wife scurrying around his back arranging meetings with his nemesis. Johnson reluctantly agreed.

Afterward, Johnson called Cohen. This had to be handled carefully. “I’ve talked with Henry,” Johnson said. “He wants to meet. What do you think I should do?”

“Go do it,” Cohen said. “You owe it to yourself and your people. It’s the right thing to do.”

Cohen and Robinson reached Nine West shortly before six o’clock. As the trio walked into the Plaza, Johnson wanted to make sure Cohen checked his ego at the door. “I want this kept on a very low key basis,” Johnson warned the Shearson chief. “I don’t want any powder kegs going off.”

As they waited, Kravis paced the room nervously. At one point, he thought he heard noises. A chirping, maybe. Kravis walked into the bedroom and found a pair of caged parakeets. He would listen to their chirping throughout the meeting.

Johnson, with Cohen and Robinson in tow, arrived at six. Roberts greeted them with a surprise for Cohen. As an icebreaker, and a play on his earlier comments, he presented the Shearson chairman with a box of fine Montecruz cigars.

“A peace offering,” Roberts said as he handed the box to Cohen. “But I wish you wouldn’t smoke them in here.”

Cohen smiled. “I’m going to sit back here in the corner and smoke them so the smoke doesn’t bother you,” he said.

It was a good start.

“Listen,” Johnson began, addressing the group. “Let’s see if we can get back to square zero here…. This thing is getting ridiculous. It seems to Jim and me—and Peter—that we can work out some compromises that make a lot of sense. It’s not going to be everything you would want. It’s not going to be everything we would want. But it’s going to be good. No one person is going to end up with everything they want to get.”

In thirty minutes they had the outlines of an agreement. Control of the RJR Nabisco board would be split fifty-fifty: Neither side would have outright control. The stock would likewise be split down the middle, with Johnson’s share coming out of Shearson’s take. If Cohen, unaware of Linda Robinson’s secret peace initiative, was surprised by the quick consensus, he didn’t show it.

As for fees, Kravis said he planned to pay each of his four investment banks $25 million. In addition, Kohlberg Kravis intended to take its customary fee of one percent. No one had to do the arithmetic: It amounted to more than $200 million, three times the size of any previous merger fee in Wall Street history.

Hold on, Robinson interrupted. He remained acutely aware that the eyes of the world were on them. They mustn’t appear too greedy, he cautioned. Surprisingly, Kravis agreed in theory to reconsider his fee.

Kravis brought up Drexel, insisting that the junk-bond powerhouse lead the bond offerings necessary to finance the deal.

Cohen stiffened. “Why Drexel?”

“Look, Peter,” Roberts said. “If we’re putting out two billion in equity, well, we wouldn’t put that kind of money on the table if the takeout of that bridge wasn’t certain.” Roberts had no confidence that Salomon, or even Shearson and Salomon combined, could do the job. “If we were doing this deal ourselves”—without Shearson—“we wouldn’t even consider you for it.”

Cohen didn’t like the idea of selling bonds under Drexel’s yoke and said so. “You know how they are. When Drexel comanages a deal, they hog the deal. They won’t give you anything.”

“This isn’t going to be that way,” Roberts assured him. “You’ll get half the fees. If you don’t sell a single bond, Peter, you get half the fees. All right?”

Cohen quit arguing.

Other issues came up. Shearson would want to handle the auction of all RJR Nabisco assets to be sold, Cohen said. Tom Hill was projecting $103 million in fees from that alone.

“That makes no sense,” Roberts argued. “You ought to parcel out each business to an investment banker seasoned in that industry.”

“Well, at least we’d want to be coadviser,” Cohen said.

“Why pay twice?”

“No, no, no,” Cohen said. “You don’t understand. That’s not what’s important. What’s important is getting your name on the tombstone.” The rankings of most active merger advisers were compiled from the names of firms listed on the “tombstone” advertisements that accompanied all major acquisitions. Cohen wanted to get credit for the sales even if Shearson didn’t get a fee. The matter was left unsettled.

In an hour they were finished. The three major issues had been agreed to. All that remained was for the lawyers to join them and pound out final details.

Johnson was thrilled. The logjam was broken! Thanks in large part to Linda Robinson, he finally had a deal. It wasn’t perfect, Johnson told himself, but it sure beat losing—or winning at some level that made it impossible to run his company.

As they headed for the door, there were smiles all around. On the way out, Robinson sidled up to Kravis, his wife’s horsebackriding partner. “You better send a big bouquet of flowers to my wife for this,” Robinson said, smiling. “She went way out on a limb for you.”

Downtown, Steve Goldstone was growing suspicious. He couldn’t find Johnson. Or Cohen. No one seemed to be at Nine West. He called Tom Hill at Shearson.

“You haven’t heard anything, have you?”

“No,” Hill said. “Have you?”

“No. But something is going on…”

“It’s not the ideal solution,” Roberts told the lawyers. “But it’s a solution.”

Returning upstairs, Kravis took a short call from Cohen.

“That’s funny,” Kravis said, putting down the phone.

“What?” Beattie asked.

“He’s bringing Tommy Strauss. You’d think he’d bring Gutfreund.”

“Strauss?” Beattie was surprised. “Why the hell is he bringing over Tommy Strauss? What the hell does he know about this business?”

Kravis didn’t have to say how he felt. To Beattie it was clear he’d just as soon not have to deal with his former friend.

Roberts took a second call. An attendant at the Oak Room wanted to know why a Mr. Roberts was charging his dinner to that room. “We show a Mr. Brown registered to that room.”

Roberts had to smile. Mr. Brown was the code name they had used in registering. “Just put it on the room,” he said.

Johnson asked Jim Robinson to see to it that only one of them went along. Somehow, Strauss was chosen. Along with Shearson’s attorney, Jack Nusbaum, that made six. Johnson was happy.

When Goldstone arrived, Johnson enthusiastically described the afternoon’s talks with Kravis. Everything was going great, Johnson said. “Now we’re to the point where Henry is going to want to see the management agreement.”

Goldstone was immediately suspicious. For two weeks he had jealously guarded the pact’s secrecy. Goldstone, like Jim Robinson, was under no
illusions about how it would appear if leaked to the press. You’re taking a big risk showing this to Kravis, Goldstone warned. If these talks fall apart, he said, Kravis could use it to crucify us in the papers.

“Jesus Christ,” Johnson said, brushing Goldstone’s concerns aside. “They’re going to be our partners here. You’re gonna be partners, you gotta have everything on the table. If there are problems, they gotta be worked out.” Johnson told Goldstone he was being paranoid. At his client’s insistence, Goldstone agreed to show Kravis a copy of the agreement. But he didn’t like it one bit.