Barbarians at the Gate (73 page)

“You’ve got to call Rossoff and get him to the meeting without Bruce,” Ammon said.

“Me? Why do I have to do it?”

“You’ve got to.”

“Oh, no,” Beattie said, laughing. “
You
do it. He’s your investment banker. I want no part of this.” In the end Wasserstein was told he wouldn’t be needed.
*

Saturday morning at seven, nearly two dozen investment bankers and lawyers gathered at Kohlberg Kravis’s offices. Two hours later Kravis led the group to Skadden Arps. Once upstairs, they kept a sharp lookout for any sign of the management group. Kravis ran into Ira Harris in a hallway. As the two men exchanged small talk, Kravis searched Harris’s face for any signal of their status, a telltale smile, a shrug of the shoulders, anything: Had the management group been called? Where do we stand? But Harris was a cipher.

The Kravis contingent was issued into a large conference room where it was met by a pair of investment bankers, Bob Lovejoy of Lazard and
John Mullin of Dillon Read. Wasserstein’s aide, Mack Rossoff, had a sinking feeling as he saw the pair. Where was Felix Rohatyn? Where was Ira Harris? This, Rossoff could see, was the B team. A bad sign.

Kravis, too, noticed they hadn’t drawn the first team. He was startled by the presence of a junior Skadden Arps attorney named Bill Frank. What did he know about their deal? And where was Atkins? For the first time Kravis realized that a meeting with the management group must be going on simultaneously. He grew nervous.

For more than an hour Kravis’s bankers and lawyers explained in detail each component of their bid package, with particular emphasis on its securities. This was nuts-and-bolts Wall Street work. The meeting droned on and on, as representatives from each of Kravis’s half-dozen investment and commercial banks proudly explained their specialties.

Then, as Scott Stuart was reciting a set of Kravis’s projections, Bob Lovejoy stopped him. The data Stuart was reading didn’t match the figures among the papers in Lovejoy’s lap, the Lazard banker said. If the special committee had done its job, everyone should have been working from the same projections.

“Looks like you don’t have the most up-to-date information,” Lovejoy said, a worried look crossing his face.

Well, Stuart countered, what numbers was the special committee using? The two men compared numbers. Both appeared confused.

Across the room alarm bells clanged in Dick Beattie’s head. He scrawled a note to Cliff Robbins, an associate sitting beside him. “Our numbers
ARE
bad,” he wrote. “We’ve got to do something about this.” Robbins nodded.

Afterward, there was pandemonium among the Kravis troops. As they rode down to the lobby, the elevator was filled with curses and shouts. “They’re cooking the books!” people were yelling. “They’re cooking the books!” Beattie was incensed. “This is outrageous. Goddamn it, they haven’t given us accurate information. We’ve been screwed.”

Pausing in the lobby, Kravis, Roberts, and Beattie pondered what to do. Earlier they had discussed their options in the event they found themselves trailing the management group. Their problem getting information, however bothersome, was their ace in the hole; it gave them grounds for a protest. If Kohlberg Kravis hadn’t been given accurate information, the auction had been flawed. If so, they had to stop the process before it went too far.

Beattie returned to his office across from Grand Central Station, dictated a short letter, and sent it off immediately to Peter Atkins. It read, in part: “We learned from John Mullin and Bob Lovejoy that we may have received inaccurate information from the management of RJR with respect to certain financial aspects…. [If so] it may be that we will want to discuss our offer with you in light of any new or more accurate information we receive.”

The pleasant words masked a sharp message. Not long after, an irritated Atkins phoned Beattie. A warning from Henry Kravis was not something he could ignore. He was equally irritated that Beattie’s protest would be a black mark on the auction’s otherwise spotless record. “I wish you had spoken to me and not written this down,” Atkins told Beattie. “I take this very seriously.”

For the moment, though, Atkins wasn’t willing to pass any new information to Kohlberg Kravis. The investment bankers, Lovejoy and Mullin, replied to Beattie’s letter with one of their own, suggesting—strangely, Beattie thought—that there was no problem with the information flow. Confused and angry, the Kravis troops could do little but await the board’s decision.

Later that afternoon, Beattie took a second call from Atkins. “Dick,” he said, “we won’t need you tonight. You can let your troops go home.”

Fear rose in Beattie’s throat. “Are you giving the same message to the other side?”

“Yes, I am.”

Beattie relaxed. A little.

“No way,” Hill said. The projections were the management group’s secret weapon, the very heart of Johnson’s value to them.

Why not? Rinaldini wondered.

“We regard our projections as proprietary,” Hill said. “What’s to
prevent you from giving them to KKR?”

“Come on…” Rinaldini said.

All morning he paced his apartment, waiting for a call. Around eleven o’clock it came. “Jimmy, you’re going to get a letter,” Peter Atkins announced. “We have a number of questions about your proposal. We need to clarify some things.”

As always, Atkins was hard to read. Maher hung up thinking the call was a good sign.
He’s not calling for his health.
On the other hand, Maher reasoned, Atkins could be attempting to establish grounds to reject their offer.

A messenger delivered the letter five minutes later. The questions were basic, mechanical, tax oriented. Without due diligence, Maher could tell, he couldn’t answer most of them. First Boston simply had to know more before it could guarantee the plan could work.

Atkins called several times that afternoon with further questions, all of which remained complicated and tax oriented, on issues that Maher felt should be subject to negotiation. “Peter, we can’t be pinned down on some of this stuff,” Maher repeated. “We’ve got to sit our people down with your people and work these things out.”

At one point Maher called Brian Finn and read him the letter from Atkins. Finn didn’t like what he heard.

“It sounds like they’re just trying to generate a record to show why they wouldn’t work with us,” Finn said.

“I don’t think so,” Maher said. “From my conversations with Atkins, I don’t think that’s the case.”

“I hope you’re right,” Finn said.

The two men discussed what they should do. Normally they would respond to Atkins’s letter in writing, or have First Boston’s tax counsel meet with Skadden’s. Neither option looked appealing. Meetings took time, and time was of the essence.

Finn felt First Boston had a trump card in Matt Rosen. The tax
lawyer’s familiarity with Finn’s idea, not to mention their personal relationship, had to be an advantage, he said. “Why don’t I just call Rosen and go through their questions?” Finn asked Maher. A quick call, he felt, could cut through the red tape. Maher agreed.

Finn reached Rosen at Skadden around noon. The tax lawyer sounded tired. “I tell you what makes me nervous, Matt,” Finn said, testing the waters. “It looks like you’re setting up a record to show why we didn’t get the job.”

“Well,” Rosen said. “I can’t tell you what’s going on. But that’s not the case. That’s not fair.”

Finn allowed himself to feel relieved. He didn’t think Rosen would lie to him. The tax lawyer had dozens of questions for Finn. To most Finn pleaded ignorance. “I can’t definitely answer that question without due diligence,” he repeated. “I just can’t.”

Finn hammered home the theme for more than an hour. “Come on, Matt, we know each other,” Finn pleaded. “You know we’re not here to make headlines with something that doesn’t work. You’ve got to let us in the door. You’ve just got to. I can’t make this better without going through the due diligence.”

When he hung up, Finn was still nervous. He knew Rosen understood the beauty of their proposal. But would he stand up for it with $20 billion at stake?

It was good to see the Johnsons, even better for all of them to get away from the city for a while. Laurie joined the Robinsons in their weight room, which was adorned by a picture of a young, unsmiling Jim Robinson hoisting a barbell. Johnson piled up on a couch, read newspapers, and watched college football on television. All four found it impossible to think about anything except the committee’s deliberations. All afternoon and into the evening they waited expectantly for a phone call that never came.

Dinner at the Robinson house that evening was Chinese food and telephone receivers. The Robinsons had five separate phone lines, and
Linda had three phones brought to the dinner table. All through their meal Johnson and the Robinsons worked their sources for information. Rumors were flying about the First Boston bid, although they couldn’t tell what, if any, impact it had had.

It was Johnson who finally hit pay dirt. They had known in advance that both the special committee and the full board were to meet the following day; the committee would vote on a recommendation, and the board, in all probability, would rubber-stamp it. Johnson, hoping to learn more about the meetings, had called a source in RJR Nabisco flight operations, a loyal employee who had worked at his side for twenty-nine years. From the worker Johnson learned that the planes normally reserved for the directors’ trips to New York had been grounded. Apparently the full board meeting had been canceled.

“That’s funny,” Johnson said. “Why the hell would they cancel it?”