The Predators’ Ball Read Free Page A

acquisition. They were small by Drexel’s new standards—who had ever heard of Ronald Perelman in 1985?—but at least they had worked.
    With Drexel’s assistance, Perelman had just taken private his mini-conglomerate, MacAndrews and Forbes. And he was in the process of acquiring Pantry Pride, a supermarket chain discharged from Chapter 11 bankruptcy reorganization in 1981, which had a huge tax-loss carryforward of over $300 million that could be used to shelter income. It would be his vehicle, he hoped, for the kind of acquisition exponentially bigger than anything he had attempted before, something that would vault him forever out of the minor leagues. For the last month or so, Perelman, a crude Napoleonic type who was drawn to glamour and status, both in companies and on the social scene, had been eyeing Revlon.
    At the conference, Milken and Perelman had agreed that when the Pantry Pride deal closed, Milken would raise about $350 million for that company in a “blind pool”—for the purpose of an acquisition, but with no target identified.
    C ARL I CAHN had been successful for years at threatening companies with a takeover only to have management buy his stock back at a premium not offered to other shareholders—a practice that came to be known as greenmail. He had started doing business with Milken just about six months earlier. Strong-willed, fiercely independent, smarter than most, he could not be controlled by Milken in the way that Peltz and Perelman could. And Milken’s was a construct—intricate, highly interdependent, requiring constant fine-tuning—where control mattered. As one former Drexel employeeputs it, “Mike feels most comfortable when you owe him your life.” And most of the people Milken touched owed him.
    Nonetheless, Milken and his colleagues had sought Icahn out, offering to refinance the bank debt he had used for his acquisition of ACF (only the second company he had acquired in six years, during which time he mounted a dozen major campaigns) and to provide him several hundred million dollars in surplus funds for what they called a “war chest.” Icahn had just completed his raid on Phillips—where Milken had stunned the corporate world by raising commitments for $1.5 billion in forty-eight hours—and had walked away from that ten-week escapade with a profit of $52.5 million.
    Icahn gave a presentation on ACF at the conference and then wandered about, dropping in on others’. One he found especially interesting was given by Robert Peiser, the chief financial officer of TWA (Drexel had raised $100 million for the airline in the past year). He asked Peiser several questions. It made Peiser uneasy. Afterward, a few onlookers warned him that Icahn was up to no good.
    T HE WORLD that Milken created for his faithful would last much longer than those four days and would extend far beyond the enclave of Beverly Hills. Before his awesome machine was forcibly slowed nearly two years later, it would transform the face of corporate America.
    It would introduce terror and mayhem into countless corporate boardrooms. It would cause frightened managements to focus on short-term gains and elaborate takeover defenses rather than the research and development that make for sustained growth. It would cause the loss of jobs, as companies were taken over and broken up.
    But it also would help to bring the owner-manager back to American business. And it would dramatically accelerate the trend toward restructuring, as once-placid managements hastened to take measures—such as selling low-earnings assets, pruning work forces, renegotiating labor contracts, closing hundreds of older, outmoded plants—before others did it for them.
    In doing all these things, the good and the bad, Milken’s machine would stir hatreds and prejudices as bitter as those in any social revolution—not surprisingly, since that in part is what this was. The denizens