Why Should White Guys Have All the Fun? (38 page)

“There could not have been any greater pressure in any deal Reg ever did,” Tom Lamia says of the French negotiations. “I think it was only when he got French government approval that he saw that the Beatrice deal was going to be done.”

In the meantime, we also had to do a multicity road show to finalize the debt offering. We went to Los Angeles, Chicago, Boston, Minneapolis, New York, and Philadelphia to sell the debt notes, which struck me as kind of odd, since I think Peter Ackerman had once told me that he had sold the damn debt in a phone booth, between Columbia Savings, First Executive, and a few others. Most of the debt was taken by that, but they still wanted to do the road show, which I think was probably for some sort of after-market in the debt paper.

The lead bank basically was good but was a little bit of a pain in the ass. They were trying to insist that they had control over what I would sell and what I would keep. Christophe said they weren’t going to change. I told them that we weren’t going to do a deal. I just said, “Absolutely not!” They wanted to list all the assets that we had and select from it. Under no circumstance would I agree to that, and they finally caved in on that point. There were a number of other points that they didn’t cave in on that hurt us—we should have been able to take out some of the higher cost debt before we paid them off entirely. But by and large they hung in: banks can be banks. In any case, that basically concluded the financing. When we got the French approval, everything was in place.

       
Bravura and Brinksmanship: Closing the Beatrice Acquisition

November 29, 1987 was a Sunday, the day before the Beatrice closing was scheduled to commence. Lewis, Tom Lamia, Cleve Christophe, and Everett Grant met at 99 Wall Street for a final preclosing briefing.

Lewis conducted a lengthy review to make sure everything was proceeding as planned on the Beatrice acquisition. He wanted to make sure that his team had everything in order, specifically regarding what was to take place during the closing, as well as the postclosing strategies they would pursue. “The real work will begin once the deal has closed,” Lewis repeatedly informed his bundled up lieutenants. Something was wrong with the heating system at 99 Wall Street that weekend, putting a distinct chill in the air inside Lewis & Clarkson.

Meanwhile, activity related to the Beatrice closing was also underway that Sunday at the closing site, the offices of the Paul, Weiss law firm at 1285 Avenue of the Americas. Lawyers were busily going through the conference rooms where the closing was to take place and laying out tons of documents in accordance to the activity scheduled to take place in that particular room.

The goal was to make sure that all of the documents were in place so there wouldn’t be any surprises when the closing got underway the following two days.

The closing of the Beatrice transaction was a draining, grueling affair that officially started November 30, lasted two days, and was played out in the Manhattan offices of the Paul, Weiss law firm. There were plots, subplots, things that came together smoothly, and things that had to be glued together by roughly 180 lawyers, accountants, financial advisers, and corporate executives working in concert to get the deal closed.

In a figurative sense as well as in a literal sense, the whole process was akin to a byzantine maze: The different teams working on the Beatrice closing were spread out over the 23rd floor of Paul, Weiss, as well as floors 24, 25, 26, 27, and 28. On various floors and in separate conference rooms were the banking team, the equity team, the subordinated debt team, and the divestiture team.

Due to the fact that Lewis was selling three of Beatrice’s units—those in Canada, Australia, and the meat packing firm in Spain—the divestiture team was further subdivided into three units, each with its own conference room and concentrating totally on one piece of an immense puzzle.

Of the various conference rooms, the one set aside for the bank people was the biggest, because their transactions generated the most paper.

There was also a conference room designated for the acquisition team, which was concerned with the purchase of the shares of the various companies being bought and sold, including Beatrice.

Because each party had its own high-powered legal counsel, attorneys from a number of prestigious Manhattan law firms were also involved.

Through a process of transactional natural selection, each conference room broke down into cells of people working on a different aspect of the particular transaction closing in that room. For example, there were people working on a legal opinion seated together at one end of the table going over some documents.

Others would be on telephones dealing with some condition to their closing, and there were periodic conference calls with people who weren’t present but who were responsible for advising a client on an issue.

So in each conference room there were typically four or five little meetings taking place at any given time, with the sound of several voices going at once creating a hum in the air.

Most of the people in the rooms were white men, wearing white or blue dress shirts, ties loosened in many instances, shirt sleeves rolled up. Monograms adorned many of the shirt cuffs not rolled up. It was a safe bet that the guys with the suspenders were investment bankers, since they tend to be partial to that fashion accoutrement. And each room had many Italian suits costing $1,000 and flashy pairs of $500 shoes.

Practically no one smoked in the conference rooms and when someone did light up, it was usually a very expensive, very large, odiferous cigar.

Down in the basement of the building, copy machines were running nonstop, as were secretaries hauling documents up and down the elevators on their way to and from floors 23 through 28. To say there was a sense of urgency in the air would be overstating things slightly—a sense of purposefulness would be more accurate. Millions of dollars were at stake.

On the second floor, typists worked around the clock to churn out documents, because as the lawyers and accountants and businesspeople moved closer to closing, they invariably found it necessary to draft additional agreements to flesh out the structures of various deals.

The best way to generate a mental snapshot of something as unwieldy and complex as the TLC Beatrice closing is to view it as a series of hundreds of mini-closings. When everyone of those smaller transactions was completed and the banks were finished wiring their funds, only then would the overall deal “close.” To get the smaller deals closed, thousands of conditions had to be met to the satisfaction of parties on both sides of the transactions.

Thousands of documents also had to be in place and ready to be signed, which is why a pre-closing team had located the majority of the germane documents and laid them out in the appropriate closing room. To mention just a few, there were certificates of good standing,
certificates of incorporation, certificates from state taxing authorities, employment agreements, and corporate contracts. In addition, the various parties typically had opinions of counsel regarding certain legal facts and conclusions.

A tiering of funding events had to take place in a certain order, or else the deal would disintegrate. There were closing activities geared toward bank financing, divestitures, and tax planning.

Canadian bankers were present to represent Onex, which had to turn over its funding in order to acquire Beatrice’s Canadian operations. Australian bankers were at Paul, Weiss to handle matters associated with the Australian asset sale, Spanish financial advisers were present, and so on.

From the first hour of the closing until the last, many of the banks that were funding various pieces of the Beatrice transaction started exerting pressure to get the deal closed quickly. Each bank had earmarked several million dollars to fund various pieces of the Beatrice deal. Several million dollars sitting around idle for even one day represents a significant loss, because that money could be generating interest and making more money. So bank representatives were concerned about the cutoff points at which they could invest their idle fund balances, and were threatening to pull their money out and invest it overnight if their part of the transaction failed to close on the first day.

If even one bank had broken ranks and followed through on their threats, the closing would have been derailed.

Lewis never went to the Paul, Weiss offices on November 30, the first day of the closing. Instead he divided his time between his brownstone on 22nd Street and his office at 99 Wall Street. Lewis was busy working out postclosing strategies for Beatrice, specifically future divestitures he planned to pursue in order to take care of debt service. Periodically he would pick up the phone and quiz Tom Lamia on the progress of the closing, mirroring the roles they played when Lewis acquired McCall.

Being away from the transactional maelstrom at Paul, Weiss freed Lewis to keep his eye focused on the big picture, instead of getting caught up with the niggling issues and details that were being spun off at a furious pace.

If any matter called for Lewis’s immediate attention, Lamia knew where to reach him. That was Lamia and Christophe’s job.

The fact that TLC Beatrice International was a holding company was causing problems for some of the banks. TLC Beatrice had no assets per se, just shares of stock that it owned in its subsidiaries. But the banks wanted collateral and the only meaningful collateral would be pledges of the shares of stocks in companies scattered around the world after some of the operating units were sold off.

So Kevin Wright had to get lawyers located around the globe, as well as bank lawyers and Beatrice lawyers to agree on what was necessary to give a bank an effective pledge in scores of different sovereignties with different laws. Arriving at a satisfying answer “was a nightmare,” Wright says. Because of all the collateral packages involved, the bank deal was the last part of the closing to coalesce.

By the end of November 30, most of the transaction documents had been signed, and the deal was more than 50 percent closed. Everyone, including Lewis, went home with the knowledge that barring some unforeseen, truly extraordinary circumstance, the wire transfer should be able to take place the following day.

On the morning of December 1, Lewis’s do-or-die date to get the Beatrice transaction done, one major piece of unfinished business remained that—to Lewis’s way of thinking—was worth about $10 million or so. Rush-hour traffic was in full swing as Lewis’s limousine glided through the streets of Manhattan, toward 9 W. 57th Street and the offices of Henry Kravis around 8 o’clock in the morning.

Lewis felt that the Italian litigation that had been filed October 30 and effectively tied up Beatrice’s shares of Gelati Sanson, the Italian ice cream division, was a significant legal problem that hadn’t been disclosed during the due diligence process. Consequently, Lewis felt he was entitled to a price reduction of $10 million, and felt Kravis was morally bound to grant it.

In fact, KKR had been resisting the reduction, which upset Lewis to no end. As he had done right after the stock market earthquake in October, Lewis planned to meet one-on-one with Kravis in an attempt to ratchet down the price of Beatrice’s international operations.

But Kravis was cognizant that the Beatrice transaction was a high-profile deal and that Lewis was fully committed to getting it done. Plus
Lewis was on the hook for several million dollars in closing costs, so with or without a price adjustment, the odds were that Lewis would go through with the deal.

So Kravis again stuck to his guns, insisting that the agreed-upon price be adhered to. And as before, Lewis capitulated, feeling that discretion was the better part of valor.

“Plus or minus 5 percent on a deal isn’t going to make it or break it, so there’s nothing to be gained by breaking a deal over a less-than-5 percent issue,” Lewis told Everett Grant afterward. Which isn’t to say that he was happy with what had transpired at Kravis’s office, but Lewis wasn’t about to let a $10 million difference of opinion scuttle a transaction worth $1 billion.

After leaving Kravis’s office, Lewis hopped back into his limousine and directed the driver to take him to Paul, Weiss. It was about 9:00
A.M
. On the way to Paul, Weiss, Lewis placed a call on the car phone to get a progress report from Tom Lamia.

Once at Paul, Weiss, Lewis rode the elevator up to the 23rd floor to meet with Lamia and Christophe. Then he briefly walked through several conference rooms to get a sense of how the closing process was progressing.

Once that was ascertained and Lewis felt comfortable with what he was seeing and hearing, he ensconced himself in an out-of-the-way conference room where few people knew where he was, except for Lamia, whom he insisted stay in the room, too. “That made my job much more difficult, because I had to tend to Reg as well as tend to everything else that was going on,” Lamia remembers. “But that’s the way Reg wanted it, so that’s what I was going to do.”

On two occasions, Lewis went outside the building and took a stroll around the block, his limousine crawling through the busy streets of New York City about 30 feet behind Lewis, should he suddenly decide to forego his walk. Accustomed to being in control, Lewis hated having to wait around for someone else to dictate his fate to him.

Lamia went with Lewis both times and they talked about Lewis’s post-acquisition plans for Beatrice.