Next came the actual bid. That was taken care of in a fairly straightforward manner with a one-page letter. The structure of the financing was simple, also. Regarding our original goal of $250 million to $300 million in bank debt, we wanted a commitment for more than that because—I can say it now—we were considering cutting Drexel out of the deal if the control issues got crazy. So if the bank had agreed to put up an amount equivalent to the $450 million to $400 million we were getting from the asset sale, then theoretically we wouldn’t need any high-yield debt.
But I decided against that strategy because: One, Mike had done an outstanding job; Two, I thought that Peter who was driving my costs up and was giving me a lot of aggravation—ultimately would follow Mikes lead on the major points. There’s also the fact that there was an alliance between KKR and Drexel. I mean Drexel was KKR’s lead banker for all of its major deals. And I knew that if I had cut Drexel out of the deal, there would be tremendous pressure on KKR not to do the deal with me. And I didn’t want that.
In any case, I thought Ackerman could be handled. He was more of a distraction on a personal basis than anything else.
So now I delegated the due diligence effort to Paul, Weiss and Deloitte Haskins and Sells, with Cleve Christophe coordinating. Their job was to go in and review the numbers. Then I assigned the tax analysis to Arthur Kalish, a talented Paul, Weiss attorney who did some brilliant work in that regard. I limited myself to overall coordination and the asset sales, which I did with Charles Clarkson and Tom Lamia primarily. I kept Drexel completely out of the asset disposition strategy. I didn’t want them involved at all.
Our bid went in. Word came out that KKR was going with somebody else. Ackerman even called and said, “Well, we got close.” I said, “Peter, I don’t even want to hear that. Call people—let’s create a climate where we can get it done.” There was about a 48-hour period where we really turned up the juice and placed a number of phone calls to key decision makers at Beatrice and KKR. To this day, I think KKR knew we were going to have the highest bid and was going to go with us all along, but they created doubt in our minds so that we effectively topped our own bid and increased it to $985 million. But that ultimately took it.
We signed a definitive agreement on August 6, 1987.
Reginald Lewis had done it. He’d managed to pull off a deal so large he could hardly believe it himself. Not only that, but the Beatrice acquisition was the largest offshore leveraged buyout that had been accomplished up to that point. Lewis had worked incredibly hard and very diligently for this moment, and it was every bit as sweet as he fantasized it would be.
A tidal wave of thoughts and emotions cascaded over Lewis, suffusing him with a glow no narcotic could ever come close to replicating. He could sense Grandpa and Grandma Cooper were somewhere beaming to themselves over his improbable accomplishment. Why should white guys have all the fun, indeed!
The smiling faces of his colleagues flashed before his eyes as though in a dream sequence and he saw hands thrusting toward him to pump his. Everything had an air of unreality about. People who thought Lewis never had any fun should get to know the euphoria that accompanies buying a billion-dollar company. And the thrill and the tremendous surge of accomplishment and pride were magnified three-fold for Lewis, because he had overcome obstacles and impediments that white financiers would never encounter and might not surmount if they did.
Lewis had a secret code that he shared with his wife whenever he accomplished something particularly noteworthy: He would sing the tune, “Raindrops Keep Falling on My Head.” Lewis picked up the phone on his desk and, praying the line wouldn’t be busy, dialed the villa in the South of France where his family was on vacation and waiting for him to join them. When Loida Lewis picked up, Lewis simply said, “Raindrops, Loida, raindrops.”
“Darling, you did it!” Loida Lewis exclaimed excitedly.
Next, Lewis made a call to the other important woman in his life. “Mom, I did it,” he said. “I accomplished what I thought I could not accomplish. I have bought almost a billion-dollar company.” Carolyn Fugett says she really wasn’t surprised by the call. “I didn’t jump up and down and scream and carry on and all that kind of stuff,” she says. “I have always, from the first day he came into this world, perceived greatness for Reg and each time that it happened, it just reassured my faith in him. 1 was elated and thrilled and what have you, but I can’t truly say that I was overwhelmed.”
After the euphoria at 99 Wall Street subsided somewhat, Lewis had to go to Morgan Stanley’s offices on 50th Street to review some documents and sign them. When that task was taken care of, Lewis, Kevin Wright, Everett Grant, Cleve Christophe, and Tom Lamia walked out of a conference room and into a hallway. They strode around a corner, toward a bank of elevators. A smiling Lewis asked, “Is anybody looking?” After everyone had answered in the negative, Lewis jumped straight up and clicked his heels, reprising the feat he’d pulled off after getting a funding guarantee for McCall.
They left the building and walked toward the Harvard Club, with Lewis exuberantly throwing punches at the air. Once they’d reached their destination, Lewis ordered several bottles of the best champagne available, which he and his crew made short work of. As the champagne disappeared, Wright, Grant, Christophe, and Lamia each offered testimonials of sorts to the growing legend of Reginald Lewis. Christophe was first and had surprisingly little to say, but no one really noticed. The center of attention was Reginald Lewis. Smiling broadly and laughing readily when he entered the Harvard Club, Lewis was beginning to grow quiet and pensive as the evening progressed. The size of the task that lay ahead was sobering indeed. All the tension, hard work, and long hours that it took to win the bid for Beatrice were nothing compared to what would be necessary to close the deal for this globe-spanning empire, and Lewis knew it.
With that in mind, Lewis brought the curtain down on the Harvard Club celebration. There was still much to be done, he informed his colleagues. Feeling light-headed from champagne as well as his incredible victory, Lewis walked out of the Harvard Club and into the sweltering night air of Manhattan. The blare of car horns, the galaxy of twinkling neon signs, and even the smell of auto exhaust all seemed to register with a previously unexperienced clarity and vividness. Reginald Lewis’s senses were on edge the night of August 6, 1987. He stepped into his car, breathed deeply of cool air-conditioned air laced with the scent of leather and told his driver to head toward Lewis’s brownstone on 22nd Street.
It was premature to devote too much time to celebrating. It was time to devise a strategy for controlling the news media, so that news of the Beatrice bid would be released in the manner Lewis desired. As the sight and sounds of Manhattan glided silently past Lewis’s window, he thought about ways to manage the press, rather than leaving them to their own devices.
MEDIA BLITZ
His brownstone rolled into view and Lewis’s car stopped. He waited for his driver to get out and walk around to Lewis’s side of the car and open the door. Lewis popped out, bid his driver a cheerful “good night,” and went bounding two steps at a time up the stairs to his front door. The energy and sense of excitement he felt was incredible—having won the Beatrice bid made him feel like a frisky 20-year-old.
Once inside he went upstairs to his study and dialed Butch Meily’s home telephone number.
“Butch, I need you to come over and work on a press release,” Lewis said, his voice crackling with excitement. “I’ve just closed the deal to acquire Beatrice.”
Meily dropped what he was doing and caught a cab to Lewis’s house. “He was grinning from ear to ear and he was on the phone the whole time and he had this champagne he was drinking,” Meily recalls. “He was laughing all the time and he was just really very, very happy, very pleased. He was in shirt sleeves, with his sleeves rolled up. He was half boozed up and just really happy.”
Between phone calls, Lewis gave Meily the details of the acquisition and Meily started drafting a press release. Lewis
asked what was the best way to break the news. The strategy Meily came up with solidified his standing with Lewis and paved the way for him to eventually become Beatrice’s spokesperson.
Lewis wanted the focus of the Beatrice acquisition to be on him, not KKR or Henry Kravis or even Beatrice. And the focus was to be on the business aspects of the deal, not his background. “This is a success story due to the transaction, not because of my race,” he told Meily. “Iacocca is not cast as an Italian-American businessman and Icahn is not a Jewish-American. Why should I be an African-American?”
Another concern of Lewis’s was that Meily’s employer, Burson-Marsteller, might put a spin on the story that made Beatrice the central focus. “Reg kept complaining that we had this corporate bias and he wasn’t going to get any of his fair share of the publicity,” Meily says. Lewis and the public relations people at Beatrice agreed that news of his acquisition would be released on Monday, August 10, 1987.
Meily suggested that Lewis also give the story to a select few news organizations, provided they would agree to hold the story over the weekend and run it Monday. Lewis liked that plan of action. He would have more control that way, instead of seeing his story haphazardly dissected and interpreted during a media feeding frenzy. So he and Meily decided to give the story to a handful of reporters—the New York Times, The Wall Street Journal, and Financial Times—the following day, which was Friday. The scribes would have to agree to sit on their exclusive for two days.
The next morning, Friday at 7 A.M., Lewis caught a flight from Manhattan to Chicago to address the top executives of Beatrice. Kevin Wright flew out to Chicago with him.
As the two men rode to LaGuardia Airport for their flight, past Flushing Bay and Shea Stadium, Lewis reflected that this might be one of the last times he would have to deal with a commercial flight. Beatrice had a corporate jet fleet and Lewis had tried unsuccessfully to have one of the aircraft included in his deal. Forever rushing, Lewis hated the lines and queues that typically form in busy airports. When confronted with a long line at an airport, theater, or ballpark, Lewis dealt with them by traveling along “Route 99.” When he asked his family members, “Shall we do a Route 99?” what he really meant was, “Let’s go to the head of the line.” Lewis had the moxie to pretend to know the person at or near the front of the line. Sometimes, he wouldn’t even bother with that charade.
In the near future, Lewis promised himself, he would pull a permanent Route 99 on queues near airport x-ray machines and metal detectors, distancing himself from the jostling and bumping that takes place near reservation counters, elbow-to-elbow flights on crowded jetliners and waits for in-flight service, by buying his own airplane.
Once he and Wright boarded their plane and settled into their seats in first class, Lewis looked out the window as the ground began to slowly recede away from the jet, taking New York City and the scene of his greatest business triumph with it. Flying seemed a most appropriate activity to be engaged in, given that his mood was still somewhere in the clouds.
Once the airliner reached cruising altitude and the seatbelt sign turned off, Lewis reached into his briefcase and took out a Beatrice annual report. Time to brush up on Beatrice one more time before talking to the company’s top brass. After a moment or two, a thought raced through Lewis’s head. He looked up from his annual report and turned to face Kevin Wright. “All right, Kevin, what do you think my alternatives are in this deal? What do you think my strategy should be?”
“Well, Reg, I think you’ve got a lot of options.”
Lewis shot Wright a look as though the younger man had lost his mind. “No I don’t,” he replied. “I’ve got to sell assets and pay down the acquisition debt.” With that, Lewis turned back to his annual report.
The meeting in Chicago went exceptionally well, with Lewis effectively allaying concerns that massive change and upheaval were in the offing. It was a happy, but weary, Reginald Lewis who flew back to New York.
The following day, Saturday, he went to 99 Wall Street to take care of some minor business matters. Then Lewis had his driver take him to Kennedy International Airport for his Concorde flight. The interview with the Financial Times reporter was conducted in the back seat of Lewis’s car as Lewis rushed to the airport. The reporter who talked to Lewis, James Buchan, was impressed by the fact Lewis didn’t appear to be under any stress or strain even though he was sure the Concorde was about to take off without him. The interview went well and Lewis dashed from the back seat of his chauffeur-driven car, into the airport and through customs, then off to France.
The interviews with the New York Times and The Wall Street Journal took place by phone while Lewis was in Castellaras in the South of France where he and his family had a villa that came with an absolutely masterful chef and had a balcony offering a breathtaking view of the French countryside.
The three exclusive interviews given by Lewis all ran on Monday, kicking off a firestorm of interest in this mystery financier and his background. Financial reporters across the country were hearing the same question from their editors: “Why did we miss this story?” In their frantic push to play catch up, some even managed to get the phone number of Lewis’s mother in Baltimore.
“The news media were sickening, really sickening,” Carolyn Fugett says, sounding suspiciously like her son. “The media always like to find something wrong. They wanted to know if somebody was behind him—it’s very hard for people to realize that he had this ability to think and to accomplish. ‘Could it be true that this man did this on his own? Could it be true that he could think this well? Could it be true that he came from the ghetto?’ He didn’t come from the ghetto, he came from my home.”
Beatrice was upset over all the news coverage Lewis got, feeling that he had broken his agreement to release the news on Monday. Christophe assured them that TLC had done exactly as they had agreed: The three exclusive stories focusing on Lewis were all released on Monday, weren’t they? Anyway, Meily had tried to call Beatrice’s PR people on Friday, but they were working a half-day schedule that summer and were out of the office. Christophe called Lewis in France wanting to know if the deal might be in jeopardy because of the publicity, a notion Lewis scoffed at.
“With McCall, basically we tried to do that deal in secret until we knew that it was going to be a success,” Kevin Wright says. “Here, Reg had gone the other way and decided to shape the news rather than have it shaped for him.”
At least one black man was furious to learn of the acquisition and of the prominence it bestowed upon Reginald Lewis and that was John Johnson, the owner of Chicago-based Johnson Publishing Co. Prior to Lewis’s McCall acquisition, Johnson had run the largest African-American-owned enterprise in the United States and had become accustomed to his annual perch atop Black Enterprise magazine’s list of major African-American-owned companies. But now, with revenues just surpassing $200 million annually, Johnson was a very distant second on the list to Beatrice, which had $2.5 billion in revenue in 1987.
Johnson viewed Meily and Burson-Marsteller as media manipulators who had conspired to demote him, and he made several sulfuric phone calls to Burson’s offices accusing the firm of being part of an evil cabal out to get him. “I’m like a woman scorned,” Johnson ranted at one of Meily’s assistants on one occasion, reducing the young woman to tears. “He complained to Reg about us and Reg kept asking me about it,” Meily says. “Reg several times tried to make peace with him. Our goal wasn’t being No. 1 on the Black Enterprise list—our target was the mainstream financial community.”
Johnson’s pique seems to have lingered. To this day, his magazine, Ebony, has never mentioned Reginald Lewis.
Elated when he left the United States, Lewis became subdued and introspective after reaching the South of France. He was experiencing a palpable letdown following a prolonged and very pleasurable emotional rush. During the seven days he was in the French villa, Lewis was quiet and contemplative around his wife and children when he wasn’t playing tenni
s or reading. Part of his downswing was undoubtedly due to exhaustion, but Lewis also went through a similar phase after winning the right to purchase McCall.
While I was in the South of France, all hell broke loose in the United States. I remember calling Dick Beattie, who was KKR’s longtime counsel, and he said, “You’re the talk of the town, Reg.” Time magazine reached me in the South of France. The guy was a real jerk, so I hung up on him. Wouldn’t talk to Fortune because all they wanted to do was focus on the racial aspects of this, which were totally irrelevant to anything we were doing. But it was generating a lot of excitement.
Butch Meily had received a green light to give reporters from certain national publications Lewis’s phone number in the South of France. After having reached Lewis, who had just consummated one of the most noteworthy business deals of the year, the first question the writer from Time magazine asked was, “What’s it like growing up in the ghetto?” Not only was the question preposterous and totally inappropriate, it was a stereotype that had no relevance to Lewis.
Lewis looked at the telephone receiver in disbelief. “What the fuck!” he bellowed, slamming the phone down. “I’m not going to have this,” he growled inside his rented chateau. “This is not a minority deal or an affirmative action deal. This is a business deal and it required a great deal of effort and it’s beyond color.”
People have spent a lot of time trying to locate the wellspring of Lewis’s unstinting drive and determination to succeed. Basically, every time he faced a snub he knew was based on race, it added another log to the flames of his fierce ambition. Every unanswered phone call, every naysayer, every pundit questioning whether Lewis was really just a front for a white man motivated him even more.
Although Lewis was far too complex to ascribe his powerful drive just to one factor, his reaction to racism was unquestionably a major component in his incredible journey to the boardroom of Beatrice.
Why Should White Guys Have All the Fun? Page 26
