The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [565]
7. Typically the deals worked either by giving shareholders who sold a higher price but leaving a much weakened company for those who didn’t, or by offering a premium that was only a fraction of the value the buyer would create through actions the former management should have taken themselves. Or both.
8. Leonard Goldenson with Marvin J. Wolf, Beating the Odds. New York: Charles Scribner’s Sons, 1991.
9. Everyone from Saul Steinberg to Larry Tisch had taken a stake in the company. Meanwhile, management’s first-choice buyer was IBM. In the end, Cap Cities proved a strong fit because of the complementary TV license and the minimum divestiture required.
10. Interview with Tom Murphy.
11. Ibid. Details are also recounted in Leonard Goldenson with Marvin J. Wolf, Beating the Odds.
12. Buffett paid sixteen times earnings for Cap Cities, a 60% premium to its recent price, and, on banker Bruce Wasserstein’s insistence, threw in warrants that gave the seller a continuing equity stake in ABC. These terms, arguably, are the most lenient Buffett ever struck and suggest how badly he and Murphy wanted to buy ABC. Charlie Munger wrote to the Buffett Group on January 11, 1983, that Tom Murphy at Cap Cities had “compounded the value of his original 1958 investment at 23% per annum for 25 years.” Donaldson, Lufkin & Jenrette report February 26, 1980: “Earnings per share growth has compounded at 20% annually over the past decade and this rate has accelerated to 27% over the last five years.”
13. Geraldine Fabrikant, “Not Ready for Prime Time?” New York Times, April 12, 1987.
14. Murphy and his #2, Dan Burke, picked and chose to make divestitures required by the FCC. They kept eight TV, five AM radio, and five FM radio stations. Geraldine Fabrikant, Marc Frons, Mark N. Vamos, Elizabeth Ehrlich, John Wilke, Dave Griffiths, and Christopher S. Eklund, “A Star Is Born—the ABC/Cap Cities Merger Opens the Door to More Media Takeovers,” BusinessWeek, April 1, 1985; Richard Stevenson, “Merger Forcing Station Sales,” New York Times, April 1, 1985.
15. With 1984 sales of $3.7 billion, ABC earned $195 million, whereas Cap Cities, one third its size, earned $135 million on sales of $940 million. The disparity in profitability was mainly due to the different economics of network affiliate stations versus the network itself but also to Murphy and Burke’s management skills.
16. According to “Extortion Charge Thrown Out; Judge Cancels $75,000 Bond,” Omaha World-Herald, March 19, 1987, charges against Robert J. Cohen were dismissed after the case was referred to the Douglas County Board of Mental Health and Cohen was moved to the Douglas County Hospital from the Douglas County Corrections Center. Terry Hyland, in “Bail Set at $25,000 for Man in Omaha Extortion Case,” Omaha World-Herald, February 5, 1987, refers to the kidnapping plan.
17. Interview with Gladys Kaiser.
18. Ibid.
19. Based on examples of actual letters received.
20. Interview with Gladys Kaiser.
21. Interviews with Howie Buffett, Peter Buffett, Susie Buffett Jr.
22. Interview with Susie Buffett Jr.
23. Alan Farnham, “The Children of the Rich and Famous,” Fortune, September 10, 1990.
24. Interview with Howie Buffett.
25. Interview with Peter Buffett.
26. Billy Rogers letter to Warren Buffett, August 17, 1986.
27. Warren Buffett letter to Billy Rogers, August 22, 1986.
28. Billy Rogers letter to Warren Buffett, undated.
29. Interviews with Tom Newman, Kathleen Cole.
30. Richard I. Kirkland Jr., “Should You Leave It All to the Children?” Fortune, September 29, 1986.
31. Interview with Kathleen Cole.
32. Interview with Ron Parks.
33. Interview with Peter Buffett. He was so shaken that he dialed “0” instead of “911,” as if taken back to childhood.
34. “Billy Rogers Died of Drug Overdose,” Omaha World-Herald, April 2, 1987; “Cause Is Sought in Death of Jazz Guitarist Rogers,” Omaha World-Herald, February 21, 1987.
35. Interview with Arjay Miller.
36. Interviews with Verne McKenzie, Malcolm