Barbarians at the Gate (80 page)

As bad as the cover was, the worst damage to Johnson was, as usual, self-inflicted. What about the outsize management agreement? “My job is to negotiate the best deal that I can for my people.” Does a chief executive deserve that kind of reward? “It’s kind of Monopoly money.” Wouldn’t lots of people lose their jobs? Sure, Johnson said, “But the people that I have, particularly the Atlanta people, have very portable types of professions: accountants, lawyers, secretaries. It isn’t that I would be putting them on the breadline. We have excellent severance arrangements.”

That wasn’t quite true. The special committee wanted each bidder to include employee-protection guarantees in their draft merger agreements, a notion the management group was stoutly resisting. The point would
take on significance, because a longtime employee was lobbying hard for the employee protections.

Ward Miller, the special committee’s secretary, was a longtime top legal officer for Johnson. The former Vice President of Worry would now also turn on Johnson. Miller had joined Standard Brands fresh out of law school in 1961. Now he was fretting for all his many old colleagues who would be fired as Nabisco was broken up. In this lull between bidding rounds, he had a chance to do something about it.

To each of the directors, Miller insisted on several points: guaranteeing pay and benefits of RJR Nabisco employees for three years; giving remaining employees the right to quit with sweet severance packages if they were forced by RJR’s new owners to move more than thirty-five miles; assuring that retirees’ medical benefits would continue.

The Kohlberg Kravis lawyers didn’t like Miller’s ideas, but they negotiated them. The management group’s lawyers wouldn’t budge. Miller went back to the board members and peevishly let them know it. The only employee Johnson seemed interested in was John Martin. He was beginning to lobby directors for a fat pension for a man who’d joined the company in January.

Johnson talked to Hugel Monday afternoon. “I won’t even ask you if this will be a fair bid,” he said. “If you ask me, ‘Do I trust the people on the special committee,’ the answer is no.”

Hugel assured Johnson the process would be fair. But when he started to pound the restructuring drums again, Johnson cut him off. “Oh come on, Charlie,” he said, “that shit’s getting pretty tiresome.”

Tuesday morning Hugel was astounded to take a call in his hotel room from Johnson. He looked at the clock; it was six-ten. “What are you doing up?” Hugel asked. The only time Johnson was ever awake at six o’clock, he figured, was when he had stayed up all night.

“We’re trying to figure out what’s going to happen on the bids,” he said. The Shearson camp was divided, Johnson went on. Most thought Kravis was bowing out; a few, like Johnson, feared he might come in with a blockbuster bid.

“I don’t know what they’re going to do,” Johnson said.

“What the hell are you asking me for?” Hugel said. “I don’t know either. Just go as high as you can.”

“Be ready to make a decision,” Klein counseled that morning. “Today is the day.”

That morning Maher and his aides were busy arm-twisting senior officials at Chase Manhattan on the monetization proposal. They got nowhere. Klein’s partner Harry Gray got the bank’s chairman on the line, but the executive was leaving for Russia in less than an hour and wasn’t inclined to spend the time overruling his senior credit officer.

Maher was badly wounded. Without bank backing, Finn’s idea was just that, an idea. Maher decided to lower his sights. If a bank wouldn’t agree to fund the monetization proposal, First Boston had to get someone to vouch for the soundness of the idea. Maher needed something—anything—to give the board to convince them the project was workable.

Mel Klein tried Bankers Trust, but was told it had no extra people to spare. Then, at noon, Harry Gray tried Citibank once more and struck pay dirt. A team would be over to First Boston at two o’clock.

It was going to be close.

By Monday afternoon Rich had no idea what form First Boston’s bid would take: a merger, a recapitalization, or something else entirely. “Look, I’m running out of time here,” he told a gathering in Maher’s office. “I’m going back to my office and writing this deal now. If you guys don’t tell me the deal, I’m submitting what I wrote, not what you agree on.” Rich then stalked out.

By one o’clock Tuesday morning, when Rich convened a meeting of lawyers in the forty-fourth-floor boardroom, he still hadn’t calmed down. Going around the table one by one, each lawyer had something to say
about a document in Rich’s package. The speeches droned on and on. At such times some men might count sheep. Gordon Rich counted lawyers. He got to thirty-eight before losing his temper.

“Look, if it’s not vitally important, I don’t want to hear it,” Rich announced. “I don’t care about every last little change. This will be done my way.”

All Monday night and into Tuesday morning, Rich stalked First Boston’s halls demanding the material he had to send to Atkins. “Shut the fuck up!” he yelled at attorneys. “This is how we’re doing it. If you want to complain, go to Maher!”

By early Tuesday afternoon, Rich was beside himself. For four days he had pleaded with these people to deliver their work twenty-four hours ahead of time. Yet here it was, just hours to go, and he still didn’t have half the documents he needed.

Like some fairy-tale troll, Rich began grabbing people as they walked by his office, demanding to know when their part of the package would be delivered. At the height of his frustration, he managed to snag Brian Finn. For some reason—Rich wouldn’t remember why—speaking to Finn was vitally important. When a lawyer named Mike Rothfeld stuck his head into Rich’s office and summoned Finn, Rich angrily objected.

“No. No. You can’t have him,” Rich shouted at Rothfeld. “Get out of here!”

When Finn rose to leave, Gordon Rich lost it. He grabbed his gray plastic phone, stretched the cord to its full length and hurled the receiver against its console with all his strength. Both the receiver and the console were demolished. Finn and Rothfeld beat a hasty retreat.

Afterward, Rich left his office and wandered through empty offices on the forty-first floor. He was so tired he thought about simply leaving the building. Figuring he’d probably be fired, Gordon Rich returned to his office to wait.

With three hours to go, Fennebresque didn’t have time to worry about itineraries and escorted the bankers upstairs to an unoccupied dining room. “Look, here’s the situation,” he explained to the bank team’s
leader. “In a few hours we’ve got to put a bid in. One of the banks crapped out on us at the last minute. There’s no doubt this bid is eminently financeable. There’s no doubt once the logjam breaks, there will be bank money here. We’d like you to give us the strongest letter you can.”

For ninety minutes Fennebresque briefed the bankers on First Boston’s strategy. In case they didn’t understand, he handed them a draft letter he had written. Maybe something like that, he added. Suggestions never hurt.

“Finn, I’ve got a big problem.”

“What’s that?”

“We’re short a quarter billion dollars.”

“You’re what?” Finn was aghast. “What you are talking about?”

“Seslowe didn’t deliver.”

The two men walked for a few minutes as the lawyer explained the depth of their predicament. They paused by an empty desk outside Maher’s office. Inside, Finn could see a downcast Seslowe issuing what must been a series of mea culpas. The accountant walked out toward where Finn and Handelsman stood. He stopped, then turned away. Finn glanced at Handelsman. There was no mistaking the malice in the lawyer’s glare.

Handelsman turned to Finn as Seslowe wandered off. “I could ask Jay for the money,” the lawyer said, “but I’m not real excited about the prospect.”

“I don’t know about that,” Finn said, “but we don’t send that letter without the equity.”

If the Pritzkers ponied up the money and won, both men knew they could syndicate most of it within days; banks and institutional investors would be clamoring for a piece of the action. But that didn’t put money in their pockets now.

“You’ve really got no choice,” Finn said. “You make the call to Jay, or we’re out. Even with the equity, this thing’s a long shot. Without it, we haven’t got a snowball’s chance in hell.”

Maher, too, rejected any suggestion of delivering a bid without equity commitments. Lacking the monetization commitment was bad enough; lacking the downpayment bordered on black comedy.

Mel Klein now called around to a number of his fund’s investors and managed to pick up $5 million here, $10 million there. It was pocket change. An hour before bids were due, they were still $200 million short. Everyone—Klein, Maher, Finn, and Handelsman—knew there was only one place that money could come from. If it came at all.