STEVE WAS NOT surprised by Loomis's resurrection. "It was completely logical from Michel's point of view," he said. "He saw me as a threat, and he saw Bill as a friend. The last thing he wanted to do after watching what happened with me was to have someone else there who wasn't completely loyal to him. Bill viewed himself as having one client and that was Michel." Other Lazard veterans were far less pleased, though. One said he was "incredulous" when Michel named Loomis to succeed Steve because Loomis was just a "yes-man" for Michel who "wasn't successful at anything he did. He lived this kind of unexplainable charmed life." Steve's no-nonsense practicality gave way once again to Loomis's enigmatic and moralistic sermons, replete with references to Michel's long-held Gaullist view--now fully adopted by Loomis--that Lazard was more than just a special firm, it was a special idea.
The first one came at a partners' meeting that same June. "Lazard World is the continuation of an idea which I first saw myself in 1978," he opined. "Michel picked up the tatters of a Lazard franchise that year with a vision." Loomis said that vision had helped the firm grow net income from around $5 million in 1978 to more than $500 million globally in 1998. In closing, he thanked Steve and said, "It's up to us now. And it can be successful and fun, with the freedom to be different than the rest. We can do anything as partners of Lazard."
Michel tapped Loomis to complete the three-house merger Michel's way and to fulfill Michel's "dynastic ambitions," as one partner put it less than charitably. But not, nota bene, to be his successor or even the firm's CEO. As a rainmaker, Loomis was certainly no replacement for either Felix or Steve, although he was their equal in inscrutability. He would without question, though, do Michel's bidding. Loomis told his partners he intended not only to spend time with clients but also to devote much of his energy to making the three-house merger a success.
The logical first step toward accomplishing the three-house merger to create what Michel liked to call a "one-firm firm" was to begin to aggregate, if possible, the various disparate ownership interests in Lazard not held by Michel or by the Lazard partners. There was no point in having a third party, in this case Pearson, in a position to thwart Michel's "dynastic" plans. The obvious--and long-expected--move was to buy back from Pearson its 50 percent stake in Lazard Partners, which translated into a 50 percent stake in Lazard Brothers, a 7.6 percent interest in Lazard Freres & Co. in New York, and an 8 percent stake in Lazard Freres & Cie in Paris. There was a time when many Lazard partners thought that Pearson would end up buying all of Lazard. But Scardino had the opposite view. She wanted to shed Pearson's extraneous collection of assets to focus the company almost exclusively on publishing. To the Lazard bankers, her calculus was simple. She told them Pearson wouldn't stand in the way of the three-house merger. She just wanted Pearson's stake in Lazard to be bought for a full price. "That was the moment when real money started to shift," Verey said.
In June 1999, without much fanfare and three days after Michel told BusinessWeek he hoped Pearson would "stay" as an owner of the Lazard partnerships, Lazard and Pearson announced a deal. After negotiating with Scardino in the elegant den of his Fifth Avenue apartment on a couch just below Picasso's 1932 masterpiece Femme nue en dormie, Michel--through his French private-equity fund, Eurazeo--agreed to buy Pearson's Lazard stakes for an initial price of PS410 million, or $649 million, in cash (later reduced to PS395 million, or about $625 million), plus a PS15 million dividend. Pointing a few years later to the Picasso painting, which he believes is now worth well north of $10 million, he said of Scardino, "All the time she was saying, 'Look, if you give me this, my price changes entirely.'" The price paid to Pearson was considered high, implied a valuation for all of Lazard at some $3.785 billion, and would become known forever more as the "Pearson price," an important legal valuation benchmark to those managing directors, both active and limited, seeking to sell their ownership positions privately in Lazard, given the lack of a public market for the firm's stock. At the time, a Credit Lyonnais analyst in Paris valued the firm at $5.1 billion based on comparing Lazard's earnings with those of its competitors. Verey called the Pearson negotiation "pretty good misery, frankly." He and Michel agreed to leave the Pearson board as part of the deal.
UNLIKE ANDRE, FOR whom art was part of a stage set, Michel had--and still has--an intense passion for art and art collecting. He unquestionably inherited his grandfather's love of art, if not his daily compulsion to buy--after all, art prices today are considerably higher, as a relative matter, than they were eighty years ago, and even a man with Michel's immense wealth has to be careful. "Dealers are very quick on the ball," he explained. "When they know you are less in the market, their solicitation of you decreases radically. When you are in the market, it increases radically." Michel fairly blossoms when the opportunity arises to explicate his world-class art collection, which is annually listed by ARTnews as among the two hundred best on the planet. "When you see Michel looking at a picture or talking about a picture, there is more than knowledge," the art dealer Guy Wildenstein explained. "He has incredible knowledge, yes, but there is more than knowledge. You can see how he's looking at it--probably like, I would say, the way Robert Parker sips wine, you know? And he's sort of enjoying every minute of it.... He is capable of buying something that is really expensive, or something that is not very expensive, but just because he loves it. But the one thing he has to do, he has to love the object. He doesn't buy for investments. He doesn't buy because he thinks it's in fashion. He doesn't buy because he thinks it's going to impress his visitors. He buys because he loves. That's really, really important."
Being in Michel's Fifth Avenue apartment, overlooking Central Park, is like being in a small, eclectic, and idiosyncratic private museum. There are sumptuous tapestries and lush carpets. Recessed lighting highlights the first-edition copies of the great works of French literature and the obscure antiquities. Everything is chosen with extraordinary care and attention to detail, as only the truly rich can do. Nothing is out of place, from the silver humidor where he keeps his stash of Cuban cigars to the family crest on the matchbook covers. Michel, of course, is modest about his lush surroundings. "What you have to understand is that I don't consider myself a collector," he said as we began a tour of the portion of his collection that is in his Fifth Avenue apartment. "I consider myself an amateur. The difference is that I have tried to surround myself with things I think are beautiful and I like which I think go one with another and which are of very diverse origins, very diverse expressions of art, mostly because they in a way elevate your thought process and your feelings. I have two key words, which are French words, and I don't know how they really translate to English: jubilation and grace. It's the joy of creation and grace, which is more religious in feeling, which is something given to you from outside. So that's what I've tried to do, and in part because of training, in part because of family, in part because of my work with museums, I have a very diversified taste, which makes it more fun but a lot more difficult in a way."
Not surprisingly, as with all his decision making, he rarely seeks outside counsel when making an art purchase. "Right or wrong, I am very solitary in my choosing," he explained. "It has to provoke an emotion in me, and I consult very little.... I may be completely wrong, but I've some confidence in my feeling for things. Sometimes I'm pretty glad. For example, at the Metropolitan"--where he joined the board in 1984--"there was a wonderful middle-aged virgin, and I said [to a curator], 'It's wonderful, but I don't know why the crown on its head disturbs me a little.' The guy said, 'Oh well, it was added in 1900.' I was very pleased that intuitively I felt there was something not completely right."
Michel's emotions are never more evoked than when he recalls the tragedies that befell his forebears' art collections, especially those of his father and his grandfather, both of which were looted by the Nazis. "I was always very impressed by my grandfather's taste," he said. "He was a great collector. So from time to time, I try to buy back things which belonged to him." There's a d
azzling piece of Russian crystal from 1932 that he bought from a dealer who bought it after his grandmother's death. Then there are ancient pieces from the steppes of Asia: a horse bit from around 1500 B.C. from Luristan, what is now western Iran, and a Sumerian commemorative nail, from 2800 B.C., that was used to build a temple. The story of the place was written down on the nail. There is a drawing (once owned by his grandfather) of Fragonard's White Bull. The actual painting White Bull also belonged to his grandfather and then to his father. When Pierre died, Michel and his sister inherited the painting and donated it to the Louvre. "So when I saw the drawing," Michel explained, "I bought the drawing back." There is a Toulouse-Lautrec portrait of a Frenchman who was the first person in France who could decipher the markings on French silver. His grandfather, the avid collector of silver, liked the idea of a portrait of such a man, and so he bought the painting. Now Michel has it. He also has part of his grandfather's vast silver collection, specifically a very rare Louis XIV service set. Very few of these sets remain because much French silver was melted down to finance the country's many military campaigns. An English family saved this particular set from that fate. "Consequently, I think it's the only Louis XIV centerpiece silver service in existence," he said. Also in his dining room are two Monet paintings that were his grandfather's. In Michel's bedroom, there is a wonderfully cheerful Fragonard painting of a young girl reading a love letter. "I like optimistic things," Michel explained. "I don't like destructive art." Michel's grandfather owned the painting until Fritz Mannheimer bought it, probably around the same time that he bought Chardin's Soap Bubbles. At Mannheimer's death, the Fragonard passed to his wife. Michel politely kept after Jane Engelhard to sell him the painting if she so desired. And she did. As for Soap Bubbles, it now hangs in the Met.
While one clear direction in Michel's collecting is his ongoing efforts to reassemble part of his grandfather's collection, another theme, just as clearly, is his interest in the erotic. In his den, on the wall above his favorite caramel-colored suede couch, is Picasso's often coveted Femme nue en dormie, a Cubist rendering of a woman sleeping in the nude. The painting is subtle and elegant. He bought it for himself. "I added this, I think extraordinary, Picasso, which is pure jubilation," he said, "with the exultation of the love for the female body." Michel believes that the "loving of the human body" is one of the pillars upon which Western art has been built. "It's fantastic to have been able to present a body and all of its facets at the same time," he explained about the evolution of the presentation of the human body throughout art history. He then pointed out his latest acquisition--"because my purchases have drastically come down since I make no money," he said--a small Ingres painting of a naked woman, placed precisely on an end table in his den between the couch and a chair. "Very, very charming and also relatively very erotic," he said of the Ingres. "Every one of these objects, or many of them, have a history. This one was made probably for a Turkish fellow who lived in Paris who had a very erotic leaning. He's the one who had also The Turkish Bath by Ingres and a famous Courbet painting of a sex of a woman called L'Origine du Monde, which is now at the museum in Paris at Orsay. He commissioned this one, and then later it belonged to Degas, which is also interesting." The Turkish Bath, now in the Louvre, and which his grandfather once owned, and L'Origine du Monde are without question two of the most erotic paintings in nineteenth-century French art.
In Michel's bedroom and the changing room right behind it are more examples of his interest in the erotic. Near his bed is a Watteau. "Also terribly charming because you see that this fellow is relatively aggressively courting her with his hand on her breast and she is a little shy, but not that shy," he explained. "Not protesting, but a little shy. At the same time, Watteau has done the inverse in the background. It's the girl putting her hand on the fellow. It has this mysterious atmosphere of Watteau. One of the things which I adore about French paintings is that all the women look intelligent. In most other countries women painted look stupid. In France, especially in the eighteenth century, they always looked bright." In the changing room, where he also watches television, there is a large Balthus painting of an adolescent girl. "It is of a young girl, knowing she's becoming ugly, and that's the way I describe her," he said. "Certainly, it's not an erotic picture at all, huh? It's a poignant picture." Nearby is an obviously aroused male-nude painting. "That is an erotic one by a surrealist, a German," he said quickly as we turned back to the living room.
THE COMBINATION, IN a month's time, of Steve's ouster and Michel's successful negotiation with Scardino made it abundantly clear--in case anyone had any doubt--that Michel was firmly back in control of Lazard. Indeed, as part of the deal with Pearson, Michel for the first time laid out his retirement timetable: he would remain CEO of Lazard until 2005, when, at age seventy-three, he would become chairman and appoint an as-yet-unknown successor. "Once you start thinking about retiring, you might as well be retired," he told Institutional Investor at the time. "At a time when we are combining the three firms, it would be difficult to replace me because of my knowledge of how the pieces fit together."
Post-merger, he reiterated, finding a new leader would be easier. "It will be whoever is suitable in the eyes of the partners," he said. But despite the bravado about his own importance, he continued to flail around for the next Great Man, even at this time reportedly reaching out to Felix and asking him to return to the firm as the elder statesman. "Michel and I are old friends, and I wish him good fortune, but the subject has never come up," the ambassador told Institutional Investor. But that wasn't true. Michel and Felix had spoken on more than one occasion, in the ambassador's residence, about Felix returning to the firm. Michel kept suggesting Felix come back to serve on the contemplated supervisory board, a role that Felix found insulting. He declined to pursue Michel's entreaties.
Meanwhile, just how this merger was going to work was beginning to worry the firm's partners. In New York especially, the concern was mounting that the ten-page outline of the proposed merger failed to elucidate how the worldwide profits would be allocated. "There is absolutely abject terror regarding preservation of compensation in New York," explained one partner. But Michel said, "I don't think there is one partner who does not view this as a great step forward." And Loomis urged his partners to relax and let the details emerge in time. "Not to address this would be partnership suicide," he said.
FINALLY, AS THINGS happen in threes, came the most sustained threat of all--this one from outside Lazard and, seemingly, beyond even Michel's octopus-like control. Quietly and with the help of the longtime Lazard partner Antoine Bernheim--described as the "Felix of France"--the French entrepreneur and investor Vincent Bollore, then forty-seven, began, in the late spring of 1999 (just as the deal with Pearson was being finalized and announced), to acquire a large stake in Rue Imperiale de Lyon, one of the four publicly traded French holding companies that over the years Michel and some of his French partners had set up and that, in turn, owned stakes in Lazard. Bollore's assault on Michel's cozy ownership scheme, which would not be disclosed publicly for more than a year, complicated matters terribly for him, and for his control of Lazard. "He's locked in his character and his legend," Bollore said, in taking aim at his foe. "His group may have problems to solve in the future." A London newspaper described the battle as "rather like the Rome city council slapping a demolition order on the Vatican."
Bollore was--and remains--the French equivalent of a 1980s-style corporate raider, but unlike most raiders, he also controls his own corporate empire. The indirect investment in Lazard was but one of several Bernheim had recommended Bollore make in European private investment banks, the others being in Rothschild and Mediobanca. Apparently, Bernheim encouraged Bollore in his activities because he felt slighted that Michel did not rise to his defense when Mediobanca deposed him as chairman of Generali, the Italian insurer, in April 1999, and because he did not appreciate that Michel failed to acknowledge his contributions to the firm at the 150th anniversary
party at the Metropolitan Museum in June 1998. For his part, Michel denied any rift with Bernheim. "It is true that Monsieur Bernheim likes and is close to Monsieur Bollore," he told a London newspaper in November 2000. "This being said, Antoine Bernheim has been totally faithful to the firm and me."
Bollore's unprecedented bet on shaking up the Lazard holding companies in the summer of 1999 was, first, born of a desire to make a lot of money. He had figured the share price of the holding companies valued Lazard at an incredible 75 percent discount to its book value, an arbitrage opportunity par excellence. As a secondary matter, Bollore had focused on Lazard's arcane corporate governance, just as he did with both the Mediobanca and the Rothschild investments: as the European Common Market continued to evolve and mature, the rules relating to corporate ownership would begin to more closely resemble the far simpler paradigm in the United States. Few corporate structures were more convoluted than Lazard's, and by buying into a corporate stack that resembled nothing as much as wooden Russian matryoshka dolls, he intended to be a catalyst for change. His first desire--to make a huge profit on these shares--would be achieved in part, he hoped, by becoming such a nuisance to Michel that the older man, true to form, would have to figure out a way to have him go away.
The last tycoons: the secret history of Lazard Frères & Co Page 66
