Why Should White Guys Have All the Fun? (37 page)

Falling back on his formidable powers of persuasion, Lewis talked Sanson into letting him see the Verona plant before leaving Italy. However, Sanson stipulated that Lewis would have to go by himself, leaving behind Meily, Lamia, and the Beatrice executives also present at the dinner. That night, workers at the ice cream facility were probably baffled by the presence of a lone black man taking a leisurely stroll around their plant like some curious sightseer.

An arrangement was later worked out with Sanson that accomplished Lewis’s objectives and that Beatrice officials would rather not make public, lest they make waves anew with Signor Sanson.

From Italy, Lewis, Lamia, and Meily flew on to Brussels, for a meeting with the heads of all the Beatrice companies in Europe. The three men shaved, showered, and were on their way to the meeting by 7
A.M
. By now, Lamia and Meily were dragging from sheer exhaustion. “It was like I had been run over by a truck,” Lamia remembers. “Reg seemed fine. He looked great and had on this new Italian suit. It was a beautiful suit.”

Lewis spoke to the Beatrice executives and as usual was quite impressive. That was followed by a trip to Beatrice’s bottling plant in Brussels. In the meantime, a major potential problem brewing back in the United States had been brought to Lewis’s attention. The tax structure of the Beatrice deal was incredibly intricate and was starting to worry Lewis’s team.

With that issue weighing on his mind, Lewis invited Meily up to his room in the Brussels hotel they were staying, in order to rehash the events of the day. Having given a flawless speech to the different operating managers of Beatrice’s European companies at an evening cocktail, now Lewis was starting to feel out of sorts. His head was pounding, and Lewis missed his family, a sacrifice his line of work often called for and that Lewis detested. He’d give anything to be able to kiss his girls goodnight, then let Loida massage his temples.

Feeling better after the terrible headache he’d suffered the previous night, but still feeling under pressure because of the Beatrice transaction, Lewis got up early to prepare for a flight from Brussels to Paris to meet with the Baud family, Beatrice’s local partner. From Paris, Lewis
would fly back to the United States and deal with the growing crisis over the tax structure of the Beatrice deal.

Tom Lamia, Butch Meily, and Bill Mowry boarded the Beatrice corporate jet with Lewis for the Paris flight. His headache may have been gone, but Lewis was still tightly wound from the pressure and anxiety caused by the transaction. Meily didn’t know Lewis well enough at that point to read the mercurial man’s moods, and innocuously asked whether Lewis had arranged for transportation from Orly Airport into downtown Paris.

“Why in the hell are you asking me that question?” Lewis yelled, startling his travel companions. “Don’t you believe that I have transportation waiting for me there? It’s none of your damn business, anyway.”

Meily, who no longer had any work to do for Lewis, merely wanted a ride into Paris from the airport. Loida Lewis was waiting at the airport and a preoccupied Lewis had only a word or two of greeting for her before everyone got into a waiting limousine sent by a Parisian friend of the Lewises, Dominique Kanga.

Before he left Paris for the United States, Lewis had a cordial but inconclusive talk with the Baud family, whose Paris-based grocery distribution business Lewis considered important to the success of TLC Beatrice.

Lewis would be back to Paris many times before the deal closed on the December 1 deadline—not because of the Baud family, but because of difficulty in winning French government approval to take over Beatrice’s assets in France.

Meanwhile, back in the United States a battalion of due diligence accountants and lawyers had to be assembled to assault Beatrice’s Chicago headquarters, unlike the preliminary initial effort. Most of the financial documents and agreements that would give Lewis an accurate financial picture of Beatrice International were located in a document room in Chicago. Cleve Christophe was put in charge of assembling a group of lawyers and accountants to handle the due diligence responsibilities.

Poring over box after box of documents isn’t particularly glamorous or exciting, but it’s critical and absolutely essential work. It can reveal unexpected problems with the assets being purchased. Lewis wanted the work to be done and he wanted a full complement of people to do
it. He also wanted people who would create the right aura, who would convey a sense of professionalism. The due diligence mission would be the first time many Beatrice executives encountered anyone associated with Reginald Lewis.

However, his frugal side didn’t want to pay a lot of money for a due diligence effort. So three days before the second wave was to hit Chicago, Lewis’s team still wasn’t assembled. “Why don’t we overwhelm them with our strength—why don’t you hire a whole bunch of actors?” Lewis said to Christophe one day, tongue firmly in cheek.

The due diligence effort did turn up previously unrevealed problems with Beatrice, specifically that extensive litigation had been filed against some operating units.

“Henry Kravis knows that the fair thing to do is give me a $10 million reduction in the price,” Lewis told his wife one day as they were being driven home in Manhattan. “I’m telling Kravis, ‘If you don’t give me this discount—which is the only fair thing to do—I’ll walk away from the deal.’”

Loida Lewis thought about that briefly, then offered this advice, “Darling, you have to pay a premium. You’re going through the door for the first time on this one, so to speak. This is your first transaction of this magnitude.”

But that wasn’t what Lewis wanted to hear at the moment. “Why do you say that?” he barked. “You don’t know anything! You don’t know whether I can close this deal or not!”

“I don’t know the deal, darling,” Loida Lewis replied, “but I know you. You will do it.”

Her husband was quiet after that.

Years afterward, Loida Lewis would ask rhetorically, “Would Henry Kravis run after him and say, ‘No, no, no, please don’t walk away—we’ll do it at a reduced price?’”

“Success is the best revenge,” Loida Lewis says.

If Lewis or his acquisition team had any illusions about their ability to control the events shaping and guiding the Beatrice deal, that conceit
was blown away on October 16, 1987, a Friday. The Dow Jones industrial average sank 108 points that day, triggering concern on Wall Street and worldwide.

But the stock market wasn’t finished. It went through an even wilder gyration the following Monday, October 19, as the Dow sank a terrifying 508 additional points. Privately, Lewis was as concerned as anyone else—if not more so—because he stood to lose millions of dollars if the economic climate suddenly destabilized. But he could not afford to be viewed as nervous or panicky in front of his acquisition team, because those emotions might spread like wildfire. So an outwardly confident Lewis continued to push ahead, giving no hint he believed the Beatrice deal would do anything but close on time.

By this time the transaction had picked up so much momentum that it seemed to have a life of its own that nothing could disrupt or throw off course.

In one important regard Lewis viewed the stock market drop as fortuitous. Now he could play hardball with Henry Kravis and demand that the price for Beatrice International be reduced. “King Henry,” as Lewis was fond of calling Kravis, would simply have to come down on the price or Lewis would pick up his marbles and leave. A few weeks earlier he had backed down on seeking a cut in price because of undisclosed litigation Beatrice was involved with.

This time, Lewis fully intended to state his case before Kravis. The stock market crash called for at least a $25 million to $50 million reduction in Beatrice’s price, and that’s what Lewis intended to ask for. The Dow had fallen more than 500 points; enormous amounts of value had been wiped out. The request seemed perfectly logical from a business standpoint.

A meeting was set with Kravis at his KKR offices. Tom Lamia, Cleve Christophe, and Everett Grant were in the limousine that took Lewis from 99 Wall Street to see Kravis.

“If he doesn’t do it, I’m walking,” Lewis said to no one in particular. “I’m not in this for my health—I’ll take my lumps and walk.” Lewis and his business partners got out of the limousine at 9 West 57th Street, the site of KKR’s offices. One day the headquarters of TLC Beatrice International Holdings, Inc. would be located in the same building—several floors above Kravis’s.

Lewis was ushered into a meeting room at KKR. Also present were Leon Black and Dean Kehler of Drexel. Kravis was the last to
arrive. In a calm and thoughtful manner, Lewis began telling Kravis that he was charging too much for Beatrice in light of the stock market stumble.

Therefore, “an appropriate adjustment would be in order,” namely a price reduction of roughly $35 million, Lewis said.

In an equally calm and thoughtful manner, Kravis adopted a hard-line approach. “Drexel has given us a letter in which they said they will get this done,” Kravis said. “We expect them to get this done.” Then Kravis asked Lewis if they could continue their conversation in Kravis’s office.

“We appreciate your views on the matter,” Kravis said quietly after closing the door to his office. “We’ve done our analysis and we don’t quite get there the same way you do. We’ve really come a long way on this and we’d really like to see you consummate this deal. We’re pulling for you.”

“King Henry” had spoken: The price was to remain unchanged.

With the situation unchanged from when Lewis came over to see Kravis, he left. Lewis was ticked off and felt that he was being mistreated, not to mention that KKR and Kravis weren’t doing the proper thing. Lewis gave some more thought about whether to actually pull out, as he had been privately threatening to do, but decided against it.

“I would have expected them to reduce the price by $25 million at the very least—that’s what we were talking about to keep the deal together,” Tom Lamia says. “But no, they didn’t budge one inch.”

Ultimately, the price reduction issue wasn’t a dealbreaker from Lewis’s point of view. He should have been granted his price cut, but Lewis knew that he would lose the deal if he insisted.

His meeting with Kravis took place on Thanksgiving weekend. The deadline for closing the deal—December 1—was fast approaching.

With the tension mounting exponentially with each passing day, Lewis was spending a fair amount of his time at 99 Wall Street inside his office with the door closed. “He was calm under pressure and thought well under pressure,” Tom Lamia recalls. “He didn’t let the little things get in the way and he was able to focus on the right things.”

Away from the office, Lewis was dealing with the tension by popping movies into his VCR, or by going to classical music concerts. His favorite movie during the Beatrice negotiations was “Chato’s Land,” a Western featuring Charles Bronson as a half-breed being hunted down by a posse for killing a drunken man. Bronson gunned down each of
the twelve posse members one by one—perhaps Lewis saw the movie as a metaphor for what he was going through in trying to get the Beatrice deal done.

The Beatrice transaction could have closed as early as late October 1987. The holdup was due to a problem Lewis was having with France, where his European headquarters would be based and where most of his operations would be located.

Lewis had to find a way to get the interest on the acquisition debt deductible in France, because a lot of the income to be generated in France was taxable there. So it was critical that Lewis be able to set up a French holding company, which would be the borrower and would pay the interest. In addition, the holding company had to be able to upstream income from the French operating companies, use that money to pay interest and have those interest payments deductible for French income tax purposes.

The only problem was, the French government had to give its approval, and the French weren’t cooperating. The lack of cooperation was partially a function of chauvinism, because one of the unsuccessful bidders in the auction for Beatrice’s international foods business had been Bon Grain, a French company.

For a time, Lewis practically lived at the Crillon Hotel in Paris as he waited for the French to act. Lewis’s last day for gaining approval from the French was November 30, or he would have to scuttle the entire Beatrice transaction.

We had a big legal issue with the structure because we needed approval in France from its Ministry of Finance. Everybody thought it was going to be simple, but it got complicated. I had to make several trips to France to meet with its Finance Minister (Edouard Balladur, now Prime Minister of France). I was really shuttling for a while. Finally, I got to see the Minister’s first deputy, Charles Dequase, and I looked him dead in the eye and said, “This delay is costing me $6 million.” He was shocked, of course—that was about 30 million French francs. The next day we got the approval.

The green light from the French government came on November 28, just two days before the deadline.

The approval didn’t come a moment too soon. The pace of the entire Beatrice deal had slowed down while everyone cooled their heels waiting for a final determination from the French. Also, putting the divestiture sales on hold for nearly a month had started to cause problems, too.

The senior management at Cadbury Schweppes, for example, had come to the conclusion they were paying Lewis too much for the Australian operations. So Lewis was told that up until December 1 Cadbury Schweppes would pay the agreed upon price. After that, all bets were off.