Why Should White Guys Have All the Fun? (44 page)

Sloan’s column mentioned the then-pending Crowther McCall lawsuits against Lewis, suits where a federal court later twice vindicated him of any wrongdoing. Sloan also discussed the $11.3 million Lewis reaped after the sale of TLC Beatrice’s Latin American divisions. Princely sums to be sure, but chicken feed compared to the tens of millions of dollars some LBO artists were fetching in greenmail—protection money paid by companies that didn’t want to be taken over. Plus the money Lewis got appeared richly deserved in light of TLC Beatrice’s financial performance the following year.

Still, when Lewis was trying to pull off the TLC Beatrice IPO in 1989, he was painted as a gouger and plunderer of companies.

But the final blow was delivered in a
Barron’s
piece that noted TLC Beatrice’s cash flow “was more apparent than real.” After that story ran, Lewis’s IPO was dead in the water. The top executives of TLC Beatrice viewed the
Barron’s
piece as sensationalist claptrap and drafted a letter of protest that was signed by Everett Grant and sent to
Barron’s
editor, for what it was worth.

An
Investment Dealers’ Digest
story that ran in July 1990, referred to the
Barron’s
article on the TLC Beatrice IPO as a “mugging.”

Lewis was totally enraged, but his anger was directed at Merrill Lynch. In an argument that mirrors the one he directed at Bear, Stearns following the failed McCall IPO, Lewis blasted Merrill Lynch for their lack of resolve in pushing the TLC Beatrice public offering across the finish line. Merrill Lynch had done a great dog-and-pony show to get his business and had even sent a top executive to Lewis’s Paris office to boast that “when Merrill Lynch says they’re going to do something, they deliver.” Only they didn’t deliver, and they’d cost Lewis a lot of money.

“He’d always reflect back to the 1989 deal that didn’t come off with Merrill Lynch and what it cost him from an opportunity lost perspective,” one of Lewis’s former top executives says. “I don’t think he ever liked Merrill Lynch after that.”

TLC Beatrice’s Chairman and CEO also believed that if Drexel had been carrying the ball, his second IPO attempt would have reached the end zone. Never one to admit defeat, Lewis hadn’t ruled out a third IPO attempt at some point in the future.

“I’m going to let a couple of years go by, because the next time we’re ready to have an offering, the price will be even better,” Lewis told Ellis Goodman. In 1991, Lewis toyed with the idea of going public at $50 a share, but decided against it.

Not wishing to be perceived a whiner and not wanting to jeopardize future opportunities when his 1989 IPO collapsed, Lewis never said anything about it publicly. However, privately he groused that his company was being held to a different standard.

Investment Dealers’ Digest
lent some credence to that point of view with an article on May 28, 1990. The story was about “reverse LBOs,” a term for IPOs sought by companies acquired with leveraged buyouts: “The first glimpse of the new tough standards for reverse LBOs came last December. TLC Beatrice International . . . tried to go public
with a $180 million offering. The deal was shelved, although Lewis had successfully concluded asset sales worth $854 million.”

The piece went on to surmise that Lewis may have been thwarted because the expected price of TLC Beatrice’s shares was almost 30 times earnings per share, when the norm was less than that.

Lewis endured other business disappointments as the leader of TLC Beatrice. He tried without success to acquire other businesses until shortly before his death in 1993.

A major factor behind Reginald Lewis’s acquisition push was his desire to have a U.S. leg to his empire, as a hedge against economic or currency fluctuations in Europe. In 1989, Lewis came within a whisker of buying AmBase, a diversified financial services company that at the time owned Home Insurance Co. and Carteret Bancorp. AmBase had hundreds of millions of dollars in debt because of junk bonds, but Lewis thought AmBase’s problems obscured tremendous untapped potential. Lewis took a letter of intent to AmBase’s headquarters and had Bear, Stearns lined up as his investment banker. But the deal was shot down at the last minute for unspecified reasons by AmBase’s board.

That may have been a lucky break, because AmBase’s stock price plummeted from $12.25 at the end of 1989 to 31 cents in 1990, while its debt soared to $738 million.

Lewis also took a run at the domestic operations of Beatrice Co., which were sold to ConAgra for $1.3 billion in June 1990, even though Lewis tendered a higher bid. If he had succeeded, the acquisition would have put such brand names as Peter Pan peanut butter and Orville Redenbacher popcorn under the TLC Beatrice umbrella. Kohlberg, Kravis, Roberts & Co. sold Beatrice Co. to ConAgra and Lewis felt Kravis never took his bid seriously. (Kravis declined to be interviewed for this book.)

Not only did a bid lower than Lewis’s win the day, but the higher bid tendered by Lewis was never even acknowledged. “My price was higher and they didn’t even call me. What do you think that was all about?” Lewis asked Tony Fugett.

“Hey, what can I say?” Fugett replied. “I think I know.”

“Yeah, I think I do, too,” Lewis said, dropping the matter.

It’s important to note that Lewis never used race as a convenient excuse for failure. Nor did he seek or receive any special dispensation for being an African-American when he bought McCall or Beatrice. But there were times in his business dealings when his efforts had been thwarted and there just seemed to be no plausible explanation. His failed attempt to buy the domestic operations of Beatrice was one of those occasions.

Lewis also thought he was treated disdainfully by the Belzberg group, a business syndicate dominated by Canadian LBO artist Samuel Belzberg. He thought TLC Beatrice had given him a superb calling card, but that wasn’t the case here.

Lewis had a letter of intent to buy the Scovill Apparel Fasteners Group, a zipper manufacturer, for $90 million. But the man who had successfully purchased an international company for $1 billion was taken lightly in his quest for a $90 million firm and accorded precious little deference or respect by Belzberg’s syndicate. It goes without saying that the reception Lewis encountered scuttled that transaction.

Business associate Phyllis Schless last saw Lewis in November 1992, two months before he succumbed to brain cancer. They were looking at the possibility of acquiring a multimillion dollar firm Schless declined naming. She does say that Lewis took a hard look at possibly buying Capital Markets Assurance Corp. (CAPMAC) which was a subsidiary of Citicorp at the time Lewis was interested in it. CAPMAC is a financial guaranty company that insures fixed income securities.

First Executive, a troubled holding company for Executive Life Insurance that later turned into a tremendous moneymaker also got a once over from Lewis. “We always thought that we would have to take opportunities that were either half-baked, overlooked, or warmed-over and use our brilliance and genius to figure out how to make lemonade out of a lemon, which Reg was fond of saying,” says his brother, Jean Fugett, Jr.

At one point in 1992, Lewis even gave some thought to buying the Baltimore Orioles baseball team before deciding it was overpriced. But by far the most fascinating company Lewis considered taking a run at in 1992 was Paramount. “I think his ideal job would have been running a movie studio, and we often fantasized about it,” TLC Beatrice’s Butch Meily says.

Lewis even made inquiries about buying one of the Big Three automakers. “We actually did look at Chrysler at a time when they were not producing the Jeep Cherokee and they were clearly under some financial duress,” says Darryl Thompson, a special assistant to Lewis from 1991 to 1992. “He had some very high level meetings with senior people. But that acquisition attempt fizzled out, too.”

With Lewis spending so much time in Paris, TLC Beatrice executives in Manhattan were seeing their Chairman and CEO infrequently.

After Bill Mowry left TLC Beatrice, Dumas Simeus became president in early 1991. He had been an executive with Beatrice Co. in Latin America. Simeus clashed with Lewis over how the company should be run and whether or not adequate results were being produced. Lewis responded by second-guessing Simeus’s decisions and accusing Simeus of holding unauthorized staff meetings with employees.

Simeus left after about a year and filed a lawsuit in New York state court accusing TLC Beatrice of withholding stock options to which Simeus claimed he was entitled.

Lewis displayed a knack for being able to attract the best and the brightest, as well as a knack for occasionally having difficulty keeping such people.

Another was Darryl Thompson, a young man with a Stanford MBA who had worked with the mergers and acquisitions section of Morgan Stanley before joining TLC Beatrice in 1990 as a special assistant to the Chairman. Thompson left amicably after about a year because he and Lewis weren’t in sync regarding the way acquisition opportunities should be pursued.

Robert Davenport, an investment banker who possesses a Harvard MBA and had been doing leveraged buyout work with First Boston, joined Lewis in 1989 as director of business development. Davenport also worked with Lewis for about a year before deciding to leave. His difficulties with Lewis mirrored Thompson’s in that he felt stymied and frustrated because Lewis would never pursue acquisition projects that Davenport recommended.

“It’s fair to say he was reasonably autocratic and had a fairly clear sense of what he wanted to accomplish and how, and really did view his employees as extensions of himself,” Davenport recalls of Lewis. “I think he was interested in the input, but he was also very interested in making sure that whatever the ultimate strategy or tactic or end product of a given process was that it would have his initials firmly embossed in the middle and on the sides.”

One of the more intriguing individuals to enter Lewis’s inner circle was David Guarino, who was hired as a senior analyst at TLC Beatrice shortly after Cleve Christophe left in 1988. Hired to perform some of the financial modeling duties that Christophe had discharged, Guarino proved himself invaluable to Lewis through his financial analysis.

“David always finds ways to make himself useful,” a former TLC Beatrice executive says.

Typical of Guarino’s relationship with Lewis was an occasion when Lewis had just given a speech at a comptrollers conference in Brussels. Guarino came rushing up to the stage to greet his boss, gushing about how wonderful the speech had been. “That’s what I like about David,” Lewis said afterward. “He’s always there, and he’s always saying something supportive.”

Guarino joined Beatrice in 1988, the same year as company spokesman Butch Meily. Both remained under Lewis’s employ until his death.

Shortly before Lewis died, he granted stock options to four employees: Wright, Guarino, Meily and Lewis’s executive secretary, Deidra Wilson. He also gave shares to the members of the board of TLC Beatrice, all of whom were his long-time friends.

       
A Door to a New Universe

Reginald Lewis’s business accomplishments transformed him into something of a celebrity. He was besieged with offers to appear at various functions and with requests to do media interviews, which Lewis turned down. Among these were “60 Minutes,” “20-20,” “The Charlie Rose Show,” and the “Oprah Winfrey Show.” Strangers recognizing Lewis’s distinctive profile would stop him on the streets of Manhattan to shake his hand or bend his ear.

Lewis, the onetime outsider, was now unquestionably a star in the firmament of American business, and one of the brighter ones at that. A move in 1989 by Jim Robinson, who was then Chairman and CEO of American Express, to make Lewis a member of the Business Roundtable further solidified his status.

Yesterday I went to this Business Roundtable meeting. The power in that room was just staggering. Richard Nixon addressed the group which was comprised of CEOs, including Bob Allen of AT&T and John Akers of IBM. Next to Akers was John Reed of Citicorp and also present was Mike Miles of Philip Morris. At the other side of the room were Charlie Sanford, the chairman of Bankers Trust, and John McGillicuddy, the chairman of Manufacturers Hanover.

It was enjoyable and interesting. Our company is one of the smaller ones, but $4 a share on a $1 stock isn’t bad, when you consider where we started.

I really had to ignore the fact that, well I was the only black person in the room. Who gives a shit? I was just talking to guys who wanted to talk to me and who can relate to me. What’s interesting, though, is the guys who are the most insecure were afraid to be seen with me.

In general terms, the decision to go on the Roundtable board after Jim Robinson invited me may have been a good decision, but Jim had to sell me on doing it because I was not interested in any sort of token stuff. But having gone to four or five meetings, the experience has proven useful
.

It’s an impressive organization and I’m convinced that everyone, believe it or not, wants to do the right thing by American industry and American business. People have their own agendas, as you might expect, in a group that lobbies on behalf of business. But in that room I got the feeling that a lot of good patriotic Americans were present. In general, I received an extremely warm and friendly reception.

One day, Bob Allen and I were chatting about football and I asked him if he played any sports in school. He said, “Yeah, I played football,” so we had a nice conversation about that. He was a defensive and offensive end, before the days when players concentrated on either defense or offense. Bob’s hands happened to be on the table, so I took a look at them and said, “Looks like you’ve got a good pair of hands. “He allowed that once a jersey or football was in his grasp, “it was mine.”