McQuade was again about to leave when Mangrum said. “One more thing. Let me have a memo on your ideas as to the worst case—just so we have an idea of the downside risk.”
McQuade called the Company’s lead outside attorney.
“You’ve read the FAX?”
“Yes.”
“Walter wants us to have a little ‘what if’ session.”
“Regarding?”
“I’ll explain when I see you. Lunch? Onethirty, Friday, at the Exchange Club?” “OK.”
Mangrum summoned for Claude D. Beauchamp, Vice President/Finance. “Where are we regarding OSR?”
“November twentythird.”
“Still two billion?”
“Yes.”
“At what price?”
“O’Reilly thinks he can get about forty-seven or so.”
“Why?”
“Because of where you said you’d have the stock by year-end.”
Mangrum nodded. “And so I shall.” He slapped the top of his desk. “I’ll get on that right now. Our friends can buy at forty today and sell at fortyseven in the spring.”
Chapter 4
May 17, Atlanta. Bea Ames was fuming. It was already six minutes past the hour. She was a sparrow of a woman, short, thin, and gray. Her thin hair, pulled back in a tight bun, made her appear as if she were facing a strong wind. Her lips were thin and pale pink. She was dressed for 1975.
She managed to assemble everyone by 9:10 for the organizational meeting of what had become known as the ‘Sloan study’.
Sloan knocked on the table. “Does everyone know everyone?” There was a general nodding of heads. “Good. Has everyone read the legislation?” There was no response. “Does your silence mean yes or no?” Sloan said.
Dr. Margaret Avery raised her hand. “I can’t speak for everyone, Tom, but since your call last week, I’ve had plenty of time to read the legislation, the schedule, and the assignments. I, for one, am ready to get on with it.”
“You’re angry, Peggy.”
“Not in the least, Tom, at least not yet. I’ve agreed to set my work aside for six months. Yale has agreed to my participation and to cover my classes for me. If you’ll tell me where I can locate my office and my secretary, I’ll get to work.”
“Hear, hear,” seconded the others.
“OK,” Sloan said, “go.”
She had supposed there would be a great deal of wind and had worried about her hair. She glanced at the speedometer. Walter was driving the Porsche at 145 kilometers per hour, yet her new permanent held firm.
He took his eyes off the autobahn long enough to smile at her.
Odd, she thought, I would have never imagined Walter Mangrum driving a Porsche. The Bentleys he kept in London and Atlanta were more his style. Still, here they were. She placed her hand on his arm and…
“Are you awake out there, Evonne?” Mangrum yelled.
“Sir?”
“Bring me the list of attendees at the Rio sales meeting.”
A moment later, Evonne Peterson, a tall, matronly woman with a head of curly
yellow hair, laid a computergenerated list on Mangrum’s desk. Ko, Singapore I&S
Pedro Silvestri, Silvestri
Kiro Watanabe, Watanabe Steel
Pier Johansson, Swenson Steel Fittings Simon Scott-Mallory, Bosrady Iron, Ltd. Bernard H. Saul, III, Bernard H. Saul & Sons Marcus Kallinen, Finland Wood Products, Ltd. Donald P. E. Delaney, Capricorn Metals Lucas Oswald, Southeast Fabrications Erik Bittelsmann, Taiwan Trading, Ltd. T. Timmons, Quality Structures, Inc. Rupert Jameson, Fox & Fox Black Iron, Inc.
He consulted his notes of the private briefings with each of the attendees. Facts concerning offering:
planned for late November.
OSR will sell 42,000,000 shares at $47.50 U.S., for a gross return of approximately $2 billion.
a support a price of 46, bid, is required by year-end;
ICP has guaranteed this bid level to OSR.
In return for purchases to provide this bid level, ICP will:
for stock to be purchased at 40 prior to the offering, guarantee ability to sell at 47 during the 90-day period following the offering;
give a half percent premium on materials purchases during the 180-day period following the completion of the offering. Due to the complexity of the plan, participants are not to commence purchases until requested to do so. The request will arrive via ICP FAX, with an implementation code of any reference to an ‘up-coming sales meeting in Sydney’.
During the next two days Mangrum telephoned each of these attendees to remind them of the discussions. Tyler sat at Sloan’s desk again. “Good meeting. What’s next?” “We are awaiting word ICP has agreed to be a subject.” “Will they?”
“Why not?”
Sloan scheduled the initial meeting among himself, Tyler, Bea, and Dan McQuade for 6:00 Wednesday morning. May 18, Atlanta.
Evonne knocked on the Chairman’s door. “May I come in, sir?”
“Something wrong with the intercom?”
“No, sir, but Mr. McQuade sent for me, gave me this envelope, and told me to deliver
it to you in person. He said to tell you no copy had yet been transmitted to Archives.” Mangrum opened the double-wrapped envelope. M E M O R A N D U M CLASSIFICATION: EYES ONLY TO RECIPIENT
TO: Walter Mangrum,
FROM: Daniel McQuade
DISPOSITION: as recipient shall order; failing an order to destroy, to Archives, ICP MAXIMUM SECRET
Question: what would be the overall effect on the Company’s share price of the issuance of new shares, such that:
the new shares would equal ten percent (10%) of the new total stock outstanding? And
there were no proceeds to the Company from the distribution?
Response: the dilution of equity without commensurate income would result in:
reduction in market value of shares;
reduction in value of any new shares to be issued near-term;
reduction of investor confidence, with further reductions in share value due to shareholder sell-off; and
general reduction in borrowing power, since credit rating agencies would doubtless downgrade bond ratings. Given a 10% dilution, I estimate an additional 15% to 25% reduction in market valuation of the Company’s shares in the initial five-to-ten days after the announcement. After the end of six-months to one-year, the market price should stabilize at a 10% reduction vis-àvis today’s market close. These estimates are, of course, tied to the Company’s performance during the period.
Question: what would be the cost of purchasing shares in the open market or via negotiated purchases from institutional investors such that the total of the purchased shares would equal ten percent (10%) of the new total stock outstanding?
Response: purchasing shares equal to 10% of the outstanding shares of the Company is not feasible. An SEC filing and subsequent purchases could be expected to drive share prices up by a factor that would certainly cause the required purchases to exceed $5,000,000,000.
Mangrum called McQuade. “That’s about my est imate, too. I’ve shredded my copy. Archives can live without this one.”
“Yes, sir, I agree.” There were rigid rules that required a copy of every document generated within the Company be transmitted to the Archives, but there were exceptions.
Mangrum replaced his handset, then called McQuade again. “One thing you missed, though.”
“What was that, sir?”
“Us, Dan. I think the outside directors could be counted on to review our effectiveness in the light of such a problem occurring. Werner-Heinz and I might find ourselves looking at rather sudden retirement.” Mangrum paused. “You, too, maybe.”
“Yes, sir.”
Mangrum paused, then said, “So, only you and I know about this.”
“Yes, sir.”
“And you know how much I’ve got on my plate right now?”
“Yes, sir.”
“Well, that makes you pr
imary on this.”
“Yes, sir.”
“But don’t wait until the last minute to bring any problems to me.”
“Yes, sir.”
May 19, Atlanta.
Sloan and his two assistants walked across a wide plaza toward the ICP Tower.
“What an ungodly time of day for a meeting.”
“It was explained to me that, quote, the sun never sets on ICP, end quote. Someone
from the senior staff is at his desk at headquarters twentyfours hours a day, every day.” “You’re kidding?” said Bea.
“That’s the story I was told. Our meeting today is with a fellow who has the
graveyard shift this week.”
The lobby doors were open. Sloan walked t o a reception desk and said, “Mr. McQuade, please.”
“You are?”
“Professor Sloan and party.”
The receptionist led them across a large lobby to a bank of elevators to an attendant. “Professor Sloan and party for Mr. McQuade.”
The attendant led them from the 79th floor lobby to a room where a man seated at the head of a conference table stood.
“This is our Secretary,” she explained, “Daniel McQuade.” She gestured toward Sloan. “Professor Sloan.”
After Sloan had introduced his associates and all had shaken hands, Sloan said, “I know you’re aware of our mission, Mr. McQuade. I won’t bother with unnecessary background.”
“You’re right about my awareness, Professor, and let me tell you I appreciate your coming to see me at this hour.”
Sloan nodded.
“Now, may we begin?”
Sloan handed him a quarterinch pile of computer printouts. “Each of the investigators is listed, the area of ICP’s history with which each is concerned, a description of the data needed, the type of analysis to be made, and the planned format of the report.”
McQuade nodded.
“For example, Woody here will be looking at the beginnings of the Company. The original investors, initial incorporation, the laws of incorporation of that period, the language of the incorporation documents and stock certificates, various classes of stock, bonds, and convertibles, any options or warrants, and so forth. Most importantly, he’ll review all of the minutes of the Board of Directors’ meetings.”
“From the beginning?”
“Yes,” Tyler said.
McQuade stared at Tyler, then gestured for Sloan to continue.
“One of the chief reasons for the study is to determine where initial capital was found and how it was employed.”
McQuade stared at the wall across the room.
Sloan glanced at Tyler, then back to the Secretary. “I guess that’s it. We’d like to get started immediately.”
McQuade recovered. “John Howard is the Senior Assistant Secretary. He’ll review these and call you.”
“That’ll be fine.” Sloan handed McQuade a business card. “Can you estimate when I might hear from him?”
McQuade riffled the computer printouts in his hand. “By two.”
Sloan and his aides squinted at the early morning sunshine.
“I could have handled a cup of coffee,” Bea said plaintively.
“Interesting folks,” Sloan said, “not a lot of laughs.”
“Did you watch McQuade’s face while you were talking about my part?” Tyler said. “I did. He looked like he was suffering some sort of seizure.”
At 9:00, Mangrum called McQuade. “You had your first meeting with the academicians this morning?”
“Yes, at 6:00.”
“They mind the time?”
“They didn’t comment.”
“Make the next one earlier.”
“Yes, sir.”
“What’d you think?”
“They seem bright, competent. I’m not...”
“Wake up, McQuade! What about their needs for information?”
McQuade calmed himself with a deep breath. “Extensive. Concentrating on early documents.”
“Yes, I was afraid of that. Call Bixby’s man for resumes on the top people.”
John Howard called Sloan at 1:00.
“Professor Sloan.”
“Good afternoon, Professor. This is John Howard, from ICP. I was to call you this
afternoon.”
“Yes, Mr. Howard. You’re early.”
“It wasn’t difficult to understand the plan, Professor.”
“And?”
“It looks fine to me. I’ve given that finding to Secretary McQuade. We’re ready
when you are. I’ll FAX a list of our people in each of the areas, together with their telephone numbers, to you. Your people will call ours?” “ Yes. As I see it, the interaction will be limited to our people requesting and receiving data and records, then returning those files that have to be returned.
“We’ll provide you with photocopies for your files.”
“That’s fine, though in some cases we’ll want to see the originals.”
Howard hesitated, then said, “We’ll work all that out, Professor. I’ll let our people know your people will be calling.”
Sloan replaced his handset and nodded at Tyler. “Seems like a nice fellow. I think we can work with him.
The team met that afternoon.
Sloan spoke, “ICP has agreed to everything we requested. Bea has the name of your individual contacts. Call the person at ICP, make an appointment, get the records or data. Massage it. Write it up. Get it to me. We have a month to get it done. If you have any problems, start with Bea. If she can’t handle it, come to me or Woody.”
Chapter 5
May 24, Atlanta.
The next team meeting was held five days later.
“Any problems?” Sloan said.
When no one else spoke, Tyler raised his hand and said. “I’m being stone-walled on
original records. I have twice said Howard about the minutes of the early board meetings. He fended off my requests by telling me the descriptive memo a Company historian had written in the early twenties was adequate to my needs. When I explained distillations would not be adequate, he said he’d have to get back to me. I’m still waiting.”
When there was no response, Tyler continued. “I’m not suggesting there’s anything in this. Tom’s question was, ‘are there any problems?’ and I’m saying I have one.”
“You have any idea of the meaning of the word ‘paranoia’, Woody?” Professor Wilson Moon laughed.
“Now, damn it, Willy, I—!”
Sloan raised his hand.
“Nice people to work with,” George Hayes offered. “I’ll be finished here ahead of schedule.”
“Me, too,” Dr. Nancy Kaplan added. “I’d guess this is the best-documented corporation I’ve ever encountered.”
Tyler said, “But, I’m telling you—!”
Sloan raised his hand again. “Woody, let’s get together on this after the meeting.” He turned his attention to the other team members. “Any other problems?” There was a general shaking of heads.
Tyler and Sloan were seated side-by-side in The Varsity, the premier fast-food restaurant at Georgia Tech. “Maybe I’ve rubbed someone the wrong way,” Tyler said.
“I doubt if there’s anything personal in this,” Sloan said.
“There’s no valid reason not to give me the records.”
“Well,” Sloan said, “do you need to see the actual originals of those first board meetings? What could have gone on besides electing investors as directors and maybe planning the Christmas party?”
“You know as well as I do I have to see those documents. Would you sign the report you’ll want me to sign without seeing them? Without looking for erasures? Comparing the original documents against the resulting corporate records?”
“Hmm, yes, of course. Have you made your requests diplomatically?”
“Yes. But why should we have to be diplomatic, anyway? These shouldn’t be sensitive documents!” His voice was rising. Sloan motioned f
or him to lower his voice. “Sorry.”
“Hmm,” Sloan mused. “Unless...”
“Unless, of course, there’s something wrong. Which was what I was about to say this morning in the meeting until you shut me down.”
“I sensed that. Accusing ICP of irregularities in its corporate records is not something to be done around the city of Atlanta.”
“I guess not, but the more they resist, the more curious I become.”
“Let me think about that—maybe call Joe Earl, though he seems like a pretty big cannon to haul out for some hundred yearold documents.”
Dan McQuade disliked having to report problems to Walter Mangrum. His forcing his chief assistant to accompany him was designed to spread Mangrum’s irritation.
John Howard was a tall, stringy man in a light blue, off-the-rack suit. He continually touched his thinning hair.
They strode side-by-side into the huge office.
“Get to it, Dan,” Mangrum growled.
“As you know, sir, John here is my chief assist...”
“I bloody well know who he is. Let’s get to the problem, then back to work before the day’s over.”
“John has a problem,” McQuade said.
“They want to see the originals,” Howard said.
“You people will chew up my time, won’t you? Who is they and what originals do they want to see?”
Howard straightened his back and spoke in a firm, clear tone. “The Sloan people are demanding to see the documentation relative to the original organization, incorporation, and stock subscriptions for Cement Products, Inc., plus the minutes of all Board meetings from the Company’s beginning.”
“And?”
“Mr. McQuade has told me those records are unavailable.”
“Quite right—they are and always will be unavailable.”
“Well, then, sir, what shall I...?”
Mangrum turned to look out of his window, then turned back. “OK, call Ralph Bixby. Tell him to pass the word to the Sloan team we are dealing in concepts here, not raw data.”
“Yes, sir,” said McQuade.
Mangrum turned away and reached for his telephone.
Both men murmured, “Thank you, sir”, and had almost left the room, when Mangrum spoke again.
The Dryden Note Page 3
