Bull Street (15 page)

“Could be he’s spooked by the potential lawsuits over the Southwest Homes IPO. An investor buys the stock at $14.75 and three weeks later it’s at $5.25, he’s likely to be upset.”

“I wish that was it. No, I think he’s backing out on us altogether.”

Mickey raised his eyebrows like he was asking, “Why?”

“He wants a face-to-face with just the two of us after the deal strategy call.”

Mickey said, “Maybe he’ll need some convincing.”

“Project Mary Claire,” Jack Grass said as he pulled his copy of the black book out of his briefcase and placed it on the desk.

Richard looked around Jack’s office. On his credenza behind his desk sat about a hundred Lucite blocks containing tombstones, mementos of deals he had done. The entire wall behind his desk was covered with neatly framed, glass-enclosed tombstones as well. Notches in his gunstock. “Ready to get started?” Jack asked into his speakerphone once LeClaire sat down. Steinberg was on the line from Chicago.

“As you can see from the table of contents,” LeClaire said, “the first tab of this section summarizes all of our analysis.”

“There’s a lot of work to do to unbundle the value in this thing,” Milner said. “So, François. Let’s cut right to it. Your strategy on page two, the one where I keep the Beta and Sigma divisions.”

Richard closed his eyes as LeClaire began outlining the strategy, playing back in his mind his session with LeClaire the day before.

“Come over here,” LeClaire had said, pulling a chair beside his desk. Richard smiled and sat. It was becoming familiar territory: learning at the elbow of the young master.

“Now,” LeClaire said, pointing to one of his pads with boxes and diagrams penned on it. If Milner bids $45.00 per share it’s a total cost of $4.5 billion for all of Tentron. Milner wants to keep two divisions and sell two. That means he sells Alpha—the consumer segment—for $1.5 billion and Gamma—the mail-order segment—for $2.0 billion, leaving him in the deal at a net cost of $1 billion.”

Richard came back to the moment as LeClaire finished outlining it for Milner.

Milner said, “I look at it more simplistically. I can probably buy the company for 45 bucks a share. I sell consumer for 15 bucks a share, mail-order for 20 bucks a share, giving me total
sale proceeds of 35 bucks a share. That means I’m buying the two businesses I want to keep for 45 bucks less 35 bucks, or a net price of 10 bucks a share.”

Milner continued, “I figure I can borrow a total of about 14.50 a share on the assets of the two divisions I want, after I sell the ones I don’t want. And because I can borrow 14.50 a share against them, and they only cost me 10.00 a share, I don’t have to put up any money at all. Anybody disagree?”

Nobody did. Richard remembered the one-page spreadsheet Milner had shown him in his office, and then LeClaire’s lecture about legions of little numbers leading into other little numbers, summing up into one page. As impressed as he was with how his team had summarized their inch-thick book into concise onepage strategies under LeClaire’s wizardry of penned boxes and diagrams, somehow Milner’s way of saying it had more punch: something for nothing.

“So, guys,” Milner said, “I can do the permanent financing once I take control. The real catch is, I need the front money to finance the tender offer to buy the company until I can put my permanent financing in place.”

“We figure you’ll need about $6 billion, including refinancing their existing debt,” Steinberg said.

“Right,” Milner said. “So where do I get that kind of money in the middle of the worst credit crunch any of us has ever seen?”

“Our partner GCG has a big balance sheet,” Steinberg said.

“I’m all ears,” Milner said.

“We have a lot of alternatives,” Steinberg said over the speakerphone. “We’ve outlined two financing scenarios. In the first scenario…”

Steinberg went on for ten minutes. Scenario one was easy: Milner borrowed $6.0 billion from GCG, paid $4.5 billion of it
in cash to Tentron’s shareholders and paid off Tentron’s existing debt with the rest. Scenario two wasn’t much more complicated. Milner borrowed $5.0 billion, paid $3.5 billion of it to the Tentron shareholders and used the rest to pay off Tentron’s debt. Then he paid Tentron’s shareholders $1.0 billion in debt of the “new” Tentron as it existed after Milner took control and sold off the divisions he didn’t want.

“…so in summary,” Steinberg said, “in scenario two, instead of all cash, you pay the Tentron shareholders $3.5 billion in cash and $1.0 billion in newly issued bonds of New Tentron. What do you think?”

“Clever,” Milner said. “Can you guys structure the bonds of New Tentron so they’ll trade publicly?”

“I don’t see why not,” Jack said.

“Very creative,” Milner said. “We need to talk about anything else right now?”

“We should discuss Tentron’s defensive charter provisions, financial and legal advisers and directors’ biographies,” LeClaire said.

“I’m not too worried about that stuff,” Milner said. He paused for a moment. “I have someone on the inside,” he said finally. “And Nick Williams, the CEO, is building a retirement home in Scottsdale. His youngest daughter just got married and he may be ready to pack it in.”

Somebody on the inside.
Was that how it worked? Richard wondered how you knew who was on whose side.

“Eight o’clock.” Richard looked back from his watch, sitting in the dim glow of his desk lamp that evening. The Portuguese
cleaning ladies were just beginning their routine. He knew it well. He watched them working. One of life’s little ironies was that they were so muscular and so overweight at the same time.

His office phone rang.

“Hello,” Richard said.

“Ça va,” Kathy said.

“Good, and you?”

“Good.”

“Really? You sound like shit. The markets got you down?”

“No, I’m okay,” Kathy said. She seemed somber, and with an agenda. “Well, you’re right about the mole; this is odd. There are hundreds of emails for trades. I printed the whole batch of them out.”

“Are they on the way?”

“You should have them by six o’clock tomorrow evening your time.”

“Anything unusual?” Richard asked.

“Yes,” Kathy said. “Prolific today. Lots of instructions—trading like crazy.”

“Are you sure it was all from him?” Richard tried to keep his voice from sounding grave. But for some reason that’s the way he felt.

“No, as you know, on any given day he accounts for about 90% of the volume of the trades.”

“So if today was a heavy day, chances are he had a heavy day,” Richard said.

“Right. I was very tempted tonight to review them all at my end to see what they said.”

“Too risky,” Richard said.

“Yeah, you’re right. No sense in pressing our luck.” Richard hung up, put his elbows on the desk and thought about the
difference between the last two conversations with Kathy about the mole.
Damn, she sounded downright scared tonight.
He watched the cleaning ladies again. Sometimes when he was in college, then again at business school, he’d wondered what it would be like to be a welder or a cleaning lady, one of those people who just took what came along because they didn’t do anything well or didn’t have any choice. Nothing much to worry about except going in every day and doing your job. Little ambition, few curiosities, fewer worries. Nothing to twist in your mind, keep you up at night. No reason to feel the nagging sense that you might wake up to something unpleasant.

The day the Lehman Brothers bankruptcy was announced, Richard walked into the Analyst bullpen in the M&A Group, looking for Peter and Stella. He could see nobody was getting much done, what with the find-yourself-standing-naked-in-Times-Square-nightmare Wall Street was living out in broad daylight. Half of Richard’s friends from business school had called him, worried. Less than two weeks earlier, the Feds had pumped billions into Fannie Mae and Freddie Mac. Now Lehman was bust, and rumors about AIG right behind it. So he could understand why the analysts in the bullpen couldn’t take their eyes off CNN, Bloomberg and CNBC. They all had one of them locked onto their computer screens, and Richard could hear their different talking heads speaking in tongues from all directions, like they were prophesying the end of the world. Most of the associates in M&A huddled in whispering clutches. Some of them talked about friends at other firms on the Street being
laid off. Some said, “First it was Bear Stearns, now Lehman,” then wondered aloud if Walker were next.

Richard smelled Rick Nunez’s sweaty feet, the kid fidgeting and slipping his loafers off and on, like he did when LeClaire hovered over him to check on his acquisition comparables. Richard gave up and walked back to his desk. His phone rang.

“Hi. How you holding up?”

“Okay, Dad. Good to hear from you.”

“Your mom and I just wanted to check in on you.”

“Thanks. It’s been an unusual day.”

“I’ll say, and on top of an unusual couple of weeks.” Dad paused, like he was waiting for Richard to say something that would put his mind at ease. When Richard didn’t have any comment, Dad said, “Is it as bad on Wall Street as we’re hearing on the news?”

“As far as I can tell.”

Dad didn’t say anything for a moment. Richard imagined Dad’s eyes zeroing in on him.

Richard said, “Schoenfeld & Co. and GCG will stand behind Walker, shore it up if they need to.”

Another pause from Dad. He said, “Has Jack taken you aside, told you anything?”

“Yeah, and in fact he asked me to spread the word around that all this will blow over in a week or two.” Richard knew that was bullshit and he didn’t know why he’d even repeated it, especially to Dad.

Dad said, “You worried?”

“I’d say rattled to the core. Not just about Walker, but the whole financial sector. This mess looks worse from where I sit than I suspect it does from where you are. They’re now calling it The Financial Crisis in the press.” Richard thought for a second
to make sure what he was going to say didn’t come out as too melodramatic. “It makes me realize that life on Wall Street can change overnight. One day you’re riding high and the next you could be out on the street.”

Richard could hear the air on the line, Dad obviously thinking. Then Dad said, “Your mom will be happy to hear I was so effective in cheering you up.”

It stung. Richard wanted to tell him it was okay, but couldn’t think of how to say it.

Dad went on, “I’m sure it will work out. I was really just calling to know you’re okay with all that’s going on.” When Richard didn’t answer after a moment Dad said, “Let me know if I can do anything.”

Richard remembered saying the same thing earlier in the day to a friend at Lehman Brothers. He realized his throat had thickened, but he managed to say, “Thanks, Dad, I’ll be okay.”

Richard left the office early and was home by 6 p.m. He thought of calling Kathy, mostly just to hear her voice. It was midnight in Paris; she was probably still up. He imagined her ready for bed, the perfect skin on her face shining after washing up, hair pulled back in a pony tail. The scent of anise-flavored toothpaste on her breath. Sitting on the bed in just a T-shirt, reading an annual report cradled in her lap, her legs crossed at the ankles Indian-style, knees spread apart.
Her calves are slim, suntanned, her thighs firm and muscular. His eye moves up her leg to where she isn’t tanned, and…