“But what would he get, except an outstanding corporation with good, solid earnings growth?” Robbins said. “That can’t be very sexy in his terms.”
“Yes, but if you look at the short run and not the long run, there’s plenty he can do if he’s greedy,” Yates answered. “I was looking at your annual report last night and tried to put myself in Gruen’s place. What did I see? A fair amount of cash to play around with. Lots of expensive luxuries that can be cut, such as your research and development expenses. Maybe a sale of the beer company, now that it’s doing so well.”
“That’s ridiculous,” Billy O’Neal, the beer business’s patron, grumbled. No one paid attention.
“So we’ve got to think Mr. Gruen is serious,” Flemming Andersen said. “How do we stop him?”
“Before you get to that, Flemming, the Board has got to decide that Gruen’s offer is unfair and inadequate. Only if they do that can you think about defenses.”
“I have no doubt the Board will do the right thing on that score,” Andersen snapped.
“Okay, then we can consider defenses. There are certain things that probably won’t work here—assuming, as I said earlier, that your Board wants to fight. A crown-jewel defense, for example.”
Yates motioned to the male cabin attendant and asked for a glass of ginger ale. While he paused to drink deeply from the glass he was given, those around him, less versed in mergers-and-acquisitions argot, tried to parse out what he meant. Frost, sensing the puzzlement—and not being entirely sure himself what Yates was talking about—was bold enough to seek clarification. “Marvin, could you explain that a little further?” Frost asked.
Yates shot an impatient, disapproving look at Frost, but he answered calmly. “Of course, Reuben. No problem. A crown-jewel defense means you sell off a part of your business—preferably the part that a raider wants—so you become a less attractive takeover target. It won’t work for AFC because all its businesses are related. There’s no obvious, discrete asset you could sell—except possibly the brewing operation, as I said before.”
“Mr. Yates, we’re not interested in selling any of our business,” Flemming said icily. “And we’re not interested in making the Company less attractive—to Jeffrey Gruen or to ourselves.”
“I understand, sir,” Yates answered calmly. “That’s why I said a crown-jewel defense wouldn’t work for you. It probably rules out a poison pill as well.”
“Marvin, can you elaborate on that?” Crowder asked. “I’m afraid not everybody is as familiar with acquisition lingo as you are.”
Frost was glad he had been spared interrupting Yates’s narrative a second time; Crowder had done the dirty work and Yates seemed not to resent it.
“Put very simply,” Yates began, “a poison pill is a right given to stockholders to purchase additional shares at a bargain price if certain events happen—like someone buying, say, thirty percent of a company’s stock. It’s a way of guaranteeing that somebody taking over a company has to pay a fair price.”
“Mr. Yates, let me repeat again, we don’t want anyone taking over AFC, at any price,” Flemming Andersen said.
“I appreciate that,” Yates answered. “Given your attitude, Flemming, you’re probably not interested in finding a White Knight, either. Though that presents interesting possibilities. I know, for example, of at least three companies that would like to diversify into the food business. Including, or so I’m told on good authority, General Motors.”
“Good Christ, Mr. Yates,” Flemming Andersen interjected, his temper all but out of control and his face red. “Are you suggesting I should let AFC fall into the hands of those idiots in Detroit? So they can do for me what they did for Ross Perot? They can scarcely bang out cars, let alone run a business they know nothing about.”
“I agree that GM is a farfetched idea,” Yates said. “But there are others, I know, who could be induced to acquire AFC on favorable terms.”
“This discussion is getting nowhere,” the Chairman said, still quite obviously angry. “I have yet to hear a suggestion, Mr. Yates, that makes any sense whatsoever. Such as some kind of counteroffer to our shareholders. Isn’t there something we could do along those lines?”
“I was just getting to that,” Yates said, unfazed by Andersen’s anger. “AFC could make an offer to purchase its own stock at a price above what Gruen is willing to pay. Of course, we don’t know what that price is, so we don’t know how expensive a tender would be. If he’s talking forty a share now, he’s probably willing to go to forty-five, or even fifty.”
“That means the Company would have to go into hock pretty badly to pay for it, doesn’t it?” Robbins asked.
“Absolutely,” Yates said. “Unless the Andersen family wants to form a group and raise the money on its own. But we’re talking big dollars—three billion perhaps.”
“I don’t like it. Don’t like it at all,” Flemming said. “We’ve always operated pretty much independent of the banks. Sure, we’ve borrowed money, but it’s always been on easy terms that we could live with. If we hock everything, the banks will stick us with all kinds of covenants and restrictions. We’d be running to them to get permission to go to the can.”
“That’s undoubtedly the case,” Yates said. “It would really be a question of who you’d rather sell your soul to—Gruen or the banks.”
“You mention three billion,” Robbins said. “Making some quick calculations here, that assumes that all the stock would be tendered. But that isn’t so. I’m sure the family shares wouldn’t be tendered, and I’m almost as sure the Foundation and the management shares wouldn’t be either. That’s well over forty percent right there.”
“How does the ownership break down exactly?” Yates asked. “I haven’t quite been able to figure it out.”
“It’s very easy,” Flemming said. “My children and my wife and I own seventeen point three percent—six point three percent by Sally and me, four percent each by Laurance here and my daughter Sorella. And three percent by my daughter Diana. She owns less because she sold a quarter of the stock she originally had.”
Flemming paused as he revealed this distasteful fact. Frost, meanwhile, had taken out a pocket notebook and was writing the figures down for future reference.
“Billy O’Neal here owns another eight point sixty-six percent. Or do you and your wife own it jointly, Billy?”
“Jointly,” O’Neal replied brusquely, his irritation presumably caused not so much by mention of his estranged wife but the surfacing in the Chairman’s figures of the inequitable division of ownership between Flemming’s branch of the family and the one his father had married into.
“Then the Foundation, which my daughter runs, owns thirteen percent,” Flemming went on. “And management, thanks to our exceedingly generous stock-option plans, owns roughly eight.” Andersen looked at Robbins—albeit with a trace of a smile—when he referred to the “exceedingly generous” stock-option plans.
Frost silently toted up the figures he had written in his notebook, realizing that forty-seven percent of the stock was accounted for in what were presumably safe hands:
Flemming & W
6.33%
Laurance
4.0%
Sorella
4.0%
Diana
3.0%
Foundation
13.0%
Billy O’N. & W
8.66%
Management
8.0% (+ or –)
———
47.0%
“Can we keep all those holders in line?” Yates asked.
“I would certainly hope so,” Andersen replied. “Of course, we have no legal right to stop any of them from tendering, but I’d be amazed if they did. Certainly that’s true of the family, the Foundation and at least top management.”
“Flemming, I’m afraid I have to say something about that,” Randolph Hedley interrupted, leaning forward from his window seat to be closer to the group. “As far as the Foundat
ion is concerned, it can’t just do what the family thinks best. Its trustees are going to have to evaluate any proposal that comes their way—including Jeffrey Gruen’s—to see what’s in the best interest of the Foundation. The trustees have a fiduciary duty to do all they can, consistent with prudence, to maximize the assets of the Foundation. That might well mean they couldn’t turn down the highest offer being made to them, whether by the Company or by Gruen.”
The group fell silent after Hedley had made his observation. Frost, with his pen and notebook, quickly calculated that buying out the Foundation shares, assuming a forty-five-dollar price, would cost almost a half-billion dollars.
“Are you saying, Randolph, that the Foundation would have to sell?” Flemming asked.
“No, I’m not saying that. I’m just alerting you that my legal advice may be that the Foundation should sell. But that will depend on all the facts, and we don’t have those today.”
“Let’s hope we can find a way around your problem,” Flemming said. “What about Gruen? Do we have to buy his stock in AFC, too?”
“I’m afraid so,” Yates said. “Unocal got away with excluding Boone Pickens when he tried to take it over. But the SEC now says you can’t discriminate against the raider.”
With this unhappy news, the group became silent as the pilot signaled from the cockpit that he was about to land in New York. As the eight men buckled up, Flemming Andersen asked Yates how he thought they should approach the meeting with Gruen the next morning.
“I think you’ll do better with a small group,” Yates said.
“Such as?” Flemming asked.
“Well, on the business side, yourself of course. And you, Mr. Robbins?”
“Yes, I want Casper there,” Flemming said. “And Laurance and Billy have expressed a desire to attend. Isn’t that right?”
The two men nodded.
“Is he having lawyers there?” Yates asked.
“He said he was.”
“Then I guess I should go. And Ernest as well—he knows much more about the Company than I do. On the other hand, I would think, Randolph, as the Foundation’s lawyer, that you wouldn’t need to attend at this juncture.”
“I agree,” Hedley said.
As they landed, Frost realized that he was the only passenger not accounted for, which made him painfully aware of his retired, out-of-the-fray status. Fortunately Flemming Andersen sensed this, and repeated his desire, expressed earlier in the day, that Reuben be present also.
Reuben was grateful for the reiterated invitation, and said as much as he and his elderly contemporary walked to the entrance of the Marine Terminal.
“We can’t leave everything to the young ones,” Andersen said. “This is going to be a real fight, Reuben, and we’re going to need every brain cell we can get on our side. I mean business about fighting this damnable upstart. As far as I’m concerned, Jeffrey Gruen will take over Andersen Foods only over my dead body.”
WAITING
5
There was a general rush for transportation at the Marine Terminal after the AFC plane landed. Four separate AFC limousines met Flemming and Laurance Andersen, Casper Robbins and Billy O’Neal.
Frost declined a ride with each of the executives—Flemming Andersen was going to Connecticut, Robbins to Westchester, O’Neal to Long Island. Only Laurance Andersen was traveling to an undisclosed destination in Manhattan, but he did not seem eager for company. Frost’s two erstwhile partners, Crowder and Yates, were off to the firm’s office, downtown at One Metropolitan Plaza, bent on sharpening the AFC antitakeover strategy, and Randolph Hedley was headed for his apartment near Gramercy Park.
The result was that Frost did not share a cab into Manhattan with anyone. This suited him perfectly. It was not that he disliked being sociable—quite the contrary, he was by nature outgoing and extroverted. But, nonetheless, at seventy-five, being “on” for an entire weekend, being in the observing eye of those who were younger and more alert, had been tiring.
Riding in the cab alone, Frost thought sympathetically of Cynthia, stranded with Nate Perkins, Diana, Sorella and assorted wives and children. She would not be happy when she returned to East Seventieth Street; indeed, she might well be furious. Frost went through his mental index of New York restaurants open on Sunday where he could take his wife and attempt to make peace.
Having settled on Vico’s, which was a new favorite of the Frosts and which was usually relatively calm on Sunday night, he tried to repress his quiet but very real anger at Yates for consciously or unconsciously humiliating him on the plane trip that had just ended. He thought bitterly of Yates’s advice to his new intimate “Flemming”—“You’ll do better in a small group.” Sound advice, perhaps, but its only real effect would have been to exclude Frost from breaking developments.
Had Yates done this deliberately? Had his younger colleague really wanted to exclude him from the handling of the greatest crisis Andersen Foods had had in the fifty-odd years it had been represented by Chase & Ward? Or had he merely been thoughtless? Reflecting as his taxi crossed the Triborough Bridge, Frost concluded that Yates, in the heat of strategic planning, had not considered Frost’s feelings; but he couldn’t entirely rule out the possibility that Yates wanted to run his own show and didn’t want Frost casting the long shadow of history and tradition over his actions.
Hurt as he was—even after almost persuading himself that there was no cause for hurt—he had to admit, however grudgingly, that both Yates and Crowder, but more especially Yates, had handled themselves well. Neither of the younger Chase & Ward lawyers was a particular favorite of Frost, nor a friend socially. In the old days, when Frost had joined Chase & Ward, it was inconceivable that any individual would have become a partner in the firm without having had some minimal professional exposure to all—or at least almost all—its members. With the firm’s growth—standing currently at thirty-nine partners and one hundred twenty associates—such personal vetting was no longer possible; one had to rely on the judgments of one’s colleagues.
Crowder and Yates had both come highly recommended by the firm’s partners with whom they had worked most closely. These assessments, correctly, were made as to professional competence and, to a certain minimal extent, as to whether the lawyers in question could function in dealing with clients. But they were in no sense appraisals of Crowder and Yates as whole men.
But did that matter? If it did, Frost mused, then there would be no legal profession—and no other profession as far as that goes. Whole men were in very short supply; finding those competent in their chosen field was quite hard enough without expecting much in the way of extraneous intellectual or social charms.
Frost might have his grievances against Yates. But look what he had done: interrupted his personal life on the last weekend before Labor Day to gather and immerse himself in every available detail about Andersen Foods and, at Flemming Andersen’s beckoning, to fly around New York State giving legal advice as he went. Some would have called Yates a workaholic with a warped sense of priorities. But if corporate raiders were going to make surprise announcements on Saturday night, knowledgeable lawyers like Yates had to be ready to deal with the consequences early Sunday morning.
Then there was Crowder. Often unable to contain his disapproval of the perfidies he saw about him. Given to stentorian and apocalyptic pronouncements. But the possessor of a first-rate mind, capable of penetrating the toughest legal thicket, of tackling the hardest legal problem. And obnoxious in an entirely different way from Yates, Frost thought with some amusement.
No, if clients wanted sweet pears without prickles they could go to the personality boys within the profession, those more skilled at dispensing charm than sound advice. God knows there were plenty of them. But if the premium was on the quality of advice given, the Flemming Andersens of this world would have to endure the eccentricities of the likes of Marvin Yates and Ernest Crowder. Or so Reuben Frost argued with himself, as he silently excused away Yates’s injudi
cious reference on the plane to the “canned crap” produced by AFC and Crowder’s gravely intoned statement, to his startled hearers, that “corporate raiders will end the American free enterprise system as we know it.”
Frost’s mind was at ease over his confreres’ utterances when he arrived at East Seventieth Street. Even before he had unpacked his suitcase, he received calls confirming the appointment the next morning with Gruen and the AFC Board meeting. It would be a busy day, and probably a busy week. He and his wife should enjoy their Sunday-night dinner with this schedule in mind.
Frost skimmed through the Sunday Times as he waited for his wife, who did not arrive until a good three hours after her husband. Cynthia had been the victim of the great New York one-two transportation punch: air-traffic delays into the airport, immediately followed by road tie-ups into Manhattan. She was tired and slightly cross, but brightened at Reuben’s suggestion of an early supper at Vico’s.
At the Second Avenue restaurant, the Frosts were greeted effusively by the two owners, Gennaro and Nino, and the two Capri émigrés who were the waiters, Cesare and Enzo. The restaurant was tiny and, when full, as it almost always was, a trifle noisy, but what it lacked in comfort was compensated for by the easy affability of the staff and the extraordinarily high quality of its food (two estimable virtues, Frost noted, that many of the fancier dining spots about New York could well copy).
“How was your trip?” Cynthia asked, after she and Reuben were seated. “I’m afraid I was so busy complaining about my own I never did ask.”
“You were on the Westwind, I believe,” Reuben said, ignoring her question and eager to show off his recently acquired knowledge about private aircraft.
Murders & Acquisitions Page 5
