The Predators’ Ball (37 page)

Drapkin, who announced in October '86 that he was leaving Skadden, Arps, where he had been earning well over $1 million a year, to join Perelman as a vice-chairman of Revlon Group (Revlon was merged into Pantry Pride, which then changed its name to Revlon Group, Inc.), predicted at that time that “Ronnie is going to turn cosmetics around. I doubt very much that he'll ever sell Revlon. I think he sees it as the cornerstone of an empire.”

Others are less rhapsodic. “It will be a tough struggle, very tough,” says one established figure in the industry. “Too much damage has been done. I don't know any cosmetics image that has ever been resurrected.” Many questioned the wisdom of Perelman's having brought Sol Levine, a protégé of Charles Revson and former consultant, whom Bergerac had let go, back into the company as its president. Bergerac had let Levine go because he considered him wanting.

Bergerac, as was to be expected, is foremost among the doom-sayers. He is convinced that Perelman was seduced by the glamour
of the beauty business, and that it will be his undoing. “Cosmetics was worth five hundred million at best,” he declared. “But instead of taking the nine hundred million for it from Adler and Shaykin, he got good to average prices for selling the health-care businesses, which were running like a clock, generating enormous profits. So he got rid of the good and kept the bad.”

That would be at odds with what Perelman had managed to do in most of his earlier, smaller acquisitions—but the cosmetics business was in itself a break with Perelman's past targets. Drexel's Abecassis admitted, “Revlon does have a fickle aspect to it that Ronnie's other acquisitions didn't have. They didn't have to depend on sophisticated selling. In Revlon, you're selling dreams—so it's a different story.

“He's done some things at Revlon—cutting expenses, consolidating. But it's certainly not done yet—not by any means. And the measures he's taken aren't going to improve the business in the long run.”

Abecassis believes that Revlon could benefit from Perelman's full attention, but the peripatetic Perelman does not see it that way. “His attitude is, he came in, he cleaned it up, he's ready to go on to the next,” Abecassis added. “It worked with flavors [MacAndrews], it worked with Technicolor, but here it's different. I told him this, just the other day. He said, ‘What am I supposed to do, sit here and look at the business every day?'

“Ronnie is a deal person,” Abecassis concluded. “He wants to
do deals.”

Given that, it is not surprising that Perelman changed the plan he and Milken had agreed upon—that he would sell off the pieces of Revlon and pay down most, if not all, of the junk acquisition debt. Instead, Perelman refinanced those notes. According to one member of the UAC (Underwriting Assistance Committee), some of its members thought that Perelman should pay down the debt, but they were overruled by others.

As for Milken's view on Perelman's keeping the cash, Abecassis said, “Mike is a trader. He has the view, you go in and out. And he's a hungry guy. So he doesn't say, ‘Stop.' Also, he trusts Ronnie.”

According to Abecassis, if the Transworld deal had gone through, Perelman would have had to give up (to Drexel, which would probably have distributed some to bond buyers) 30 percent of
the equity. “Ronnie doesn't want to give any equity—but if he doesn't, there's no deal. In Revlon, he gave Drexel warrants in Pantry Pride, and it was not that much equity. That was really a way of paying our fee. We fought. We told Ronnie next time he would
have
to give equity.”

By fall '86, Perelman was still dependent on Drexel for the multibillion-dollar deals he craved. In Transworld, which would have been a $2.5 billion deal, Perelman had no other recourse, Abecassis insisted. “You may not be able to sell assets, you need long-term money. And the banks won't do it. I went to a meeting yesterday. They [the bank] are nervous about $400 million—when we have $1.9 billion
below
them [subordinated to the bank's senior, secured debt].”

While it was not yet clear whether Perelman would succeed in resurrecting Revlon, its acquisition had certainly done wonders for his social climbing. Almost everyone who knows Perelman has a story to tell about his eagerness for that ascent (which dates back to his Philadelphia days, when he was rebuffed by that city's social elite) and for the company of the famous. He had on the payroll of Technicolor a “consultant” named Dennis Stein—known for his brief engagement to Elizabeth Taylor—who, as one associate says, is “a high-class gofer.” Stein's apparent function, this associate says, was to introduce Perelman to celebrities (though with Taylor's departure it became less viable).

A few months after taking over Revlon, Perelman hired a well-connected editor from
Town & Country
magazine, Nancy Gardiner, to be his social secretary. And he brought Ann Getty onto the Revlon board (“Ronnie is
determined
to have a glitzy board,” commented another of his associates). As reported by
Spy
magazine, Jacqueline Onassis, Halston, Caroline Herrara and Calvin Klein have been to the Perelmans' East Sixty-third Street town house for parties. And Perelman would become the honorary chairman at one of the most socially acceptable and literati-filled benefits of the year, for the New York Public Library.

Referring to all the gossip about Perelman's eagerness to gain entree to the rarefied social realm, Bergerac says, with an acid chuckle, “Teddy Forstmann had the best line of all: ‘This has got to be the highest price ever paid in the history of this country to get a good table at a New York restaurant.”

I
N
S
EPTEMBER
'86, in the opulent Revlon offices where he and “the Drexels” had arrived as hated interlopers and dropped ashes on Bergerac's Persian rugs, Perelman now seemed at home. He and Drapkin had liked calling attention to Bergerac's excesses, particularly the Boeing 727 outfitted with a gun rack for his safaris, and the Revlon offices in Paris which Perelman described as a “castle.” Now the company leased its corporate jet from a Perelman aircraft-leasing company. And now that the “castle” was
his
Paris headquarters, Perelman had decided not to sell it, after all. He was having the New York offices redecorated. And James, Bergerac's butler, was now serving Perelman.

Moreover, while Bergerac's $35 million parachute had elicited from Perelman and Drapkin a mutual outrage befitting two sign-bearers of the corporate revolution, the terms of Drapkin's employment would be far richer than any that Bergerac ever enjoyed. (It is true that Perelman would take the company private in the spring of 1987, so Drapkin would not take his king's-ransom out of public shareholders' money; but his employment agreement went into effect when Revlon Group was still a public company, and after taking the company private in the spring of '87 Perelman would owe public bondholders roughly $3.7 billion. The debt-to-equity ratio of MacAndrews and Forbes, at the top of the Perelman pyramid, would be 18:1.)

In his six-year employment agreement with MacAndrews and Forbes Holdings (which comes just under Perelman in the corporate chart of the Perelman empire, with all the other companies under it), Drapkin would receive $2 million as an inducement to enter into this employment agreement, which guaranteed him a salary that would escalate from $2,500,000 in 1987 to $4,192,650 by 1992. In addition, he would receive a bonus of $1 million each year. He would further be entitled to 20 percent of net trading profits in investment partnerships that would be formed. A separate five-year employment agreement with Revlon would guarantee Drapkin $1,150,000 each year. Thus Drapkin was to start his employment at Revlon—this paradigm of the new cost-cutting corporate age—with a guaranteed take by March 1988 of $6.7 million, which with Perelman-type trading profits factored in could easily range into the tens of millions. Nor would Drapkin be the sole beneficiary of such profligacy. Bruce Slovin and Howard Gittis would also be guaranteed many millions.

When this reporter came to interview him, Perelman assumed his interview posture. He was wearing his uniform navy cardigan sweater. He sank low into his chair, removed his tasseled Gucci loafers, put his navy-stockinged feet up on the coffee table, and worked his cigar. The posture was casual but the man was not. He continually ground his molars. He seemed to be straining to project a pleasant image—but what kept appearing from underneath, pentimento-like, was a mix of impatience, vulgarity and boiling temper that was anything but pleasant.

He raged at his secretary for taking six steps toward him to hand him a piece of paper after he had ordered her to summon Drapkin—something which required her to walk in the opposite direction. Associates say that he yells constantly at everyone who works with him—Gittis, Slovin, Drapkin, Drexel investment bankers. No one except for Milken, they say, is exempt. One associate remarked, “It really is pretty bad. The excuse is he can't control it.”

When Drapkin arrived, Perelman addressed his erstwhile Revlon opponents' perception that by the end he was unstoppable, that if they had raised the bid to $59 he would have gone to $60. “There was no point where we were committed emotionally beyond financial reason,” he declared. “Look at our record—in Richardson, for example: we have stopped where it made no sense to go forward.”

What about the fact that he had by that time raised $750 million—with high carrying charges? “It was reinvested,” Perelman said shortly. “Right now I'm sitting on a cash hoard of $1.5 billion. I have a negative carry of about one point. I am willing to do that because tomorrow morning, without making a phone call, I could do eighty percent of the transactions that are available.”

Asked when he conceived of the megaleap he made with Revlon, Perelman replied that it was “a process of bites.” No, he did not have this trajectory in mind when he started out in 1978 to buy the jewelry company, Cohen-Hatfield. “Go back to 1978: even if we'd defined it, we couldn't have funded it,” said Perelman, who refers to himself in the first person plural. “This could not have been done without Drexel.”

As to the changes he has made thus far, Perelman said he had hired Richard Avedon to photograph high-fashion models for a new ad campaign and had cut through the excessive bureaucracy that
plagued the company, eliminating numerous levels of review. All the bureaucracy, he added, stemmed from Bergerac. “He did not
run
this company.”

“It's easier to shoot little birds than to run a company,” interpolated Drapkin, referring to Bergerac's yearly shooting holidays in Scotland.

“He put in layers of form rather than substance,” Perelman went on. “Books this high”—gesturing above his head—“from each division. Four times a year, he'd budget and rebudget. He brought that practice from ITT. Geneen used that effectively. But Bergerac pulled out the form without the substance.”

Several times during the interview, Perelman denied that he had offered Bergerac extra inducements—either at the first meeting or later through Geneen (the $100 million package, which was confirmed by one of Perelman's associates). Returning to this sore point, he put his shoes back on and paced the room, raising his voice. He demanded to know how Bergerac's charges, and his rebuttal, would be presented. “How can you believe what he says?” he demanded. “This guy was stuffing his pockets at every possible moment through the process. He had his finger in this pie from the very beginning. He was a guy totally motivated by greed. Do you think if I had said to him, ‘Michel, what would it take?', he would have said, ‘No, nothing'?

“Believe me, for a hundred million, he would have taken it so fast your head would spin. He was stuffing his pockets at every opportunity. . . . How can you believe this was not a guy who was stuffing his pockets?

“And what about that château bill in Scotland, prepaid for two years? [Perelman claims that before Bergerac left Revlon he wrote a company check to cover his shooting trips to Scotland; Perelman says he stopped payment on the check.] And what about the 727 with the shower and the gun rack? Maybe you can say he didn't care about money because he was never spending his own!

“And what about when he took the china and silverware? He said he'd bought it—and then I came in here,” Perelman argued, “and they were rolling up the rug in his office and taking the
wallpaper
off the walls—yes, the
wallpaper.
There was this twenty-five-thousand-dollar mural, African wildlife, and they were taking it off the wall. I said,
‘Wait a minute
—if this stuff is his and he wants to take anything else out of here, I want to see
invoices.'

“That mural,” Perelman said in disgust, “was the ugliest thing I've ever seen. It's rolled up in the basement.”

He fixed his visitor with a baleful look. “Does that sound like a guy who is bashful about
taking?”

T
HE
R
EVLON SAGA
has no heroes. Bergerac, though far from being the inept villain that Perelman caricatures, indulged himself with the perks of corporate life. Perelman, cursed with his crude persona that offends so many, apparently attempted to entice Bergerac with lavish inducements and then furiously denied it. And Revlon's defenders, the cream of the legal and investment-banking establishment, allowed their professional judgment to be clouded by their passion, and their prejudice.

On Milken's chessboard, however, all that mattered was that his pawns keep moving deeper into corporate America, decimating its ranks further—making bids and acquisitions and issuing junk bonds and doing streams of divestitures and making new acquisitions—until one day the game would be won.