The Fourth Estate (76 page)

1i you can come up
with that amount of cash within thirty days, Mr. Townsend, you have yourself a
deal. In which case perhaps you would be kind enough to ask your lawyers to get
in touch with mine.”

“And the name of
your lawyers...

“Forgive me for
cutting this conversation short, Mr. Townsend, but I’m due on the driving range
in ten minutes, and my pro charges by the hour.”

“Of course,
Ambassador,” said Townsend, relieved that Sinclair couldn’t see the look of
disbelief on his face. He put the phone down and looked across at Tom.

“Do you know
what you’ve just done, Keith?”

‘The biggest
deal of my life,” replied Townsend.

“At three
billion dollars, it’s possibly the last,” said Tom.

“I’ll close the
damn paper down,” shouted Armstrong, thumping his fist on the desk.

Russell Critchley,
who stood one pace behind his client, felt the words might have carried a
little more conviction if Sean O’Reilly hadn’t heard them every day for the
past three months.

“it will cost
you a whole lot more if you do,” replied OReilly, his voice quiet and gentle as
he stood facing Arrnstrong.

“What do you
mean by that?” hollered Armstrong.

“Just that by
the time you put the paper up for sale, there might not be anything left worth
selling.”

“Are you
threatening me?”

“I guess you
might interpret it that way.”

Armstrong rose
from his chair, placed the palms of his hands on the desk and leaned forward
until he was only a few inches away from the trade union leader’s face, but
O’Reilly didn’t even blink. “You expect me to settle for $320 million, when only
last night I found eighteen names listed on the checking-in sheets who have
retired from the company, one of them over ten years ago?”

“I know,” said
O’Reilly. ‘They get so attached to the place they just can’t stay away.” He
tried to keep a straight face.

“At $500 a
night,” shouted Armstrong, “I’m not surprised.”

‘That’s why I’m
offering you a way out,” said O’Reilly.

Armstrong
grimaced as he looked down at the latest work sheets. “And what about Bugs
Bunny, Jimmy Carter and O.J. Simpson, not to mention forty-eight other
wellknown personalities who signed on for yesterday’s late shift? And I’ll bet
the only finger any of them lifted all night was to stir their coffee between
hands of poker. And you expect me to agree that every one of them, including George
Bush, has to be included in your redundancy package.

“Yes. It’s just
our way of helping him with his campaign contributions.”

Armstrong looked
toward Russell and Peter in desperation, hoping to get some support from them,
but for different reasons neither of them opened his mouth. He turned back to
face O’Reilly. “I’ll let you know my decision later,” he shouted. “Now get out
of my office.”

“Were you still
hoping that the paper will hit the streets tonight?” asked O’Reilly innocently.

“is that another
threat?” asked Arrnstrong.

“Sure is,” said
O’Reilly. “Because if you are, I suggest you settle before the evening shift
comes on at five o’clock. It doesn’t make a lot of difference to my men if
they’re paid for working or not working.”

“Get out of my
office,” Armstrong repeated at the top of his voice.

“Whatever you
say, Mr. Arrnstrong. You’re the boss.” He nodded to Russell and turned to
leave.

Once the door
had closed behind him, Armstrong swung round to face Peter.

“Now you can see
what I’m up against. What do they expect me to do?” He was still shouting.

‘To close the
paper down,” said Russell calmly, “as you should have done on the first day of
the seventh week. By now they would have settled at a far lower price. 11

“But if I’d taken
your advice, we’d have no paper.”

“And we’d all be
getting a night’s sleep.”

“If You want a
night’s sleep, you have one,” said Armstrong. “I’m going to settle. In the
short ten-n it’s the only way out. We’ll win them round in the end, nothing’s
more certain. O’Reilly is about to crack. I’m sure you agree with me, Peter.”

Peter Wakeham
didn’t say anything until Armstrong turned to face him, when he began to nod
vigorously.

“But where are
you going to find another $320 million?” asked Russell.

‘“at’s my problem,”
said Armstrong.

“it , s mine
too. I’ll need the money within minutes of O’Reilly putting his signature to
the agreement, otherwise they’ll come out on strike just as we’re about to
print the next edition.”

“You’ll have
it,” said Armstrong.

“Dick, it’s
still not too late...” said Russell.

“Settle, and
settle now,” shouted Armstrong.

Russell nodded
reluctantly and left the room as Armstrong picked up a phone that would put him
directly through to the editor. “Barney, it’s good news,” he boomed. “I’ve
managed to convince the unions that they should settle on my terms. I want a
front-page story saying it’s a victory for common sense and a leader on how
I’ve achieved something no one else has ever done in the past.”

“Sure, if that’s
what you want, boss. Would you like me to print the details of the
settlernenu,”

“No, don’t
bother with the details. The terms are so complicated that even the readers of
the Wall Street Journal wouldn’t understand them. In any case, there’s no point
in embarrassing the unions,” he added before putting the phone down.

“Well done,
Dick,” said Peter. “Not that I was in any doubt that you’d win in the end.”

“At a price,”
said Armstrong, opening the top drawer of his desk.

“Not really,
Dick. O’Reilly caved in the moment you threatened to close the paper. You
handled him quite brilliantly.”

“Peter, I need a
couple of checks signed,” said Armstrong, “and as you’re the only other
director in New York at the moment. . .”

“Of course,”
said Peter. “Only too happy to oblige.”

Armstrong placed
the pension fund checkbook on his desk and flicked open the cover. “When are
you returning to London?” he asked as he waved Peter into his chair.

‘Tomorrow’s
Concorde,” Peter replied with a smile.

“Then you’ll
have to explain to Sir Paul why I can’t make the board meeting on Wednesday,
much as I’d like to. just tell him that I’ve finally settled with the unions on
excellent terms, and that by the time I report to the board next month we
should be showing a positive cash flow.” He placed his hand on Peter’s
shoulder.

“With pleasure,
Dick,” said Peter. “Now, how many of these checks do you need signed?”

“You may as well
do the lot while you’re at it.”

“The whole
book?” said Peter, shifting uneasily in his chair.

“Yes,” replied Armstrong,
handing him his pen. “They’ll be quite safe with me. After all, none of them
can be cashed until I’ve countersigned them.”

Peter gave a
nervous laugh as he unscrewed the top of the pen. He hesitated until he felt
Armstrong’s fingers tightening round his shoulder.

“Your position
as deputy chairman comes up for renewal in a few weeks’time, doesn’t it”“ said
Armstrong.

Peter signed the
first three checks.

“And Paul
Maitland won’t go on for ever, you know. Eventually someone will have to take
his place as chairman.”

Peter continued
signing.

DAILY ExPRESS

8 IFE13RUARY
1991

C
abinet Escapes as IRA Bomb Explodes in
Garden of No. 10

“BITTEN OFF MORE
than They Can Chew” was the headline on the article in the Financial Times. Sir
Paul Maitland, sitting by the fire at his home in Epsom, and Tom Spencer,
traveling in from Greenwich, Connecticut, on a commuter train, both read the
article a second time, aithough only half the contents were of any real
interest to them.

The press barons
Keith Townsend and Richard Armstrong appear to have made the classic mistake of
leveraging their borrowings on far too high a ratio against their assets. They
both look destined to become case studies for future generations of students at
Harvard Business School.

Analysts have
always agreed that Armstrong initially appeared to have pulled off a coup when
he purchased the New York Tribune for only twenty-five cents while all the
papees liabilities were underwritten by the former owners. The coup might have
turned into a triumph had he carried out his threat to close the paper down
within six weeks if the unions failed to sign a binding agreement.

But he did not,
and then he compounded his mistake by eventually giving such a generous
redundancy settlement that union leaders stopped calling him “Captain Dick” and
started referring to him as “Captain Santa.”

Despite that
settlement, the paper continues to lose over a million dollars a week, although
agreement on a second package of redundancies and early retirements is thought
to be imminent.

But while
interest rates continue to rise and the vogue for cutting the cover price of
newspapers continues, it cannot be long before the profits of the Citizen and
the rest of the Armstrong Communications group will no longer be able to
sustain the losses of its American subsidiary.

Mr. Armstrong
has not yet informed his shareholders how he intends to finance the second
settlement of $320 million recently agreed with the New York print unions. His
only reported statement on the subject is to be found in the columns of the
Tribune: “Now that the second package has been accepted by the unions, there is
no reason to believe that the cash flow of the Tribune shouldn’t prove
positive.”

The City
remained skeptical of this claim, and shares in Armstrong Communications fell
yesterday by a further nine pence to £2.42.

Keith Townsend’s
mistake...

The phone rang,
and Sir Paul put the paper down, rose from his chair and went into his study to
answer it- When he heard the voice of Eric Chapman, he asked him to wait for a
moment while he closed the door.

This was
somewhat unnecessary, as there was no one else in the house at the timei but
when you’ve been the British Ambassador in Beijing for four years, some habits
die hard.

“I think we
ought to meet immediately,” said Chapman.

‘The Financial
Tintes article?” said Sir Paul.

“No, it’s
potentially far more damaging than that. I’d rather not say too much over the
phone.”

“I quite
understand,” said Sir Paul. “Shall I ask Peter Wakeham to join us?”

“Not if you want
the meeting to remain confidential.”

“You’re right,”
said Sir Paul. “Where shall we meet?”

“I could drive
over to Epsom straight away. I should be with you in about an hour,”

Tom Spencer skimmed
through the first half of the article as his train headed past Mamaroneck on
its journey into New York. He only began to concentrate fully when he reached
the words:

Keith Townsend’s
mistake was to want something so badly that he failed to keep to the basic
rules of closing a deal.

Every schoolboy
knows that if you hope to exchange old conkers for an unopened packet of
crisps, not only must you never blink, you must also wait for your opponent to
make the opening bid. But it seems that Townsend was so determined to own Multi
Media that he never stopped blinking, and without asking how much Henry
Sinclair might be willing to sell the company for, he made an unsolicited offer
of $3 billion. He then compounded his problems by agreeing to pay the full amount
in cash. just as the print unions in New York refer to Mr. Armstrong as
“Captain Santa,” Mr- Sinclair could be forgiven for thinking Christmas had come
early this year – especially when it was common knowledge that he had been on
the point of closing a deal with Armstrong for $2 billion, and even that, it is
now thought, would have been too high a price.

Having agreed
terms, Mr. Townsend found it extremely difficult to raise the cash within the
thirty days Stipulated by Mr. Sinclair. And by the time he had finally done so,
it was on such exorbitant terms that keeping to the punitive repayment schedule
may in the end prove terminal for the rest of Global International. Throughout
his life Mr. Townsend has been a gambler.

With this deal
he has proved that he is willing to risk everything on a single throw of the
dice.

On reporting
their half-year forecast yesterday, Global shares fell a further eight pence to
0.19.

Over and above
any problems the two press barons are currently facing, both of them will be
particularly hard hit by the steady rise in the price of paper and the dollars
current weakness against the pound. If the combination of these trends
continues for much longer, even their cash cows will run out of milk.