Too Big to Fail [180]
At one point, John Mack questioned the whole idea of bailouts and ruminated aloud about whether they should just let Merrill fail, too, even though seated just a few places away from him was Peter Kraus, who was standing in for John Thain. The question quickly quieted the room. Some thought he was gaming all of them—maybe he wanted to buy Merrill on the cheap? What they didn’t know was that he had approached Thain just hours earlier and had set a meeting for that evening.
Dimon looked at Mack dumbfounded. “If we do that,” he said caustically, “how many hours do you think it would be before Fidelity would call you up and tell you it was no longer willing to roll your paper?”
When Thain finally did call Ken Lewis, the conversation was brief and to the point—merely a discussion of the logistics of their meeting. Thain was concerned enough to get the details correct that he called Lewis back a second time to confirm which entrance of the Time Warner Center he ought to use.
Before driving over to Lewis’s apartment, Thain met with Fleming at the firm’s Midtown offices to strategize. He made it clear to Fleming that the discussions were purely exploratory—and that he wanted to sell only a small stake in the firm, maybe up to 20 percent.
“He’s not going to go for that,” Fleming warned. “Lewis is going to say that he wants to buy the whole company.”
Thain opened the car door himself, making a beeline to the entrance. Ducking under the extended steel-and-glass awning, with its One Central Park address, he rushed solo up the South Tower to Lewis’s apartment.
Lewis greeted Thain warmly in a room with striking views but one that revealed its status as a corporate apartment by the virtual absence of artwork or furniture.
“Given all the events that were going on,” Thain said, once they settled themselves, “I am concerned about the impact on the market and on Merrill if Lehman were to go bankrupt.” He paused for a few seconds and then said bluntly: “I’d like to explore whether you’d have an interest in buying a 9.9 percent stake in the company and providing a large liquidity facility.”
“Well, I’m not really very interested in buying 9.9 percent of the company,” Lewis shot right back just as directly. “But I am interested in buying all the company.”
“I didn’t come here to sell the entire company,” Thain replied with a slight grin on his face, having not expected Lewis to be so aggressive.
“That’s what I’m interested in,” Lewis repeated firmly.
Thain nervously tried to forge a compromise. “Are you willing to go down two tracks, explore a 9.9 percent sale and explore a 100 percent sale?”
“Yes,” Lewis agreed, “but remember that I said to you, I’m not really interested in 9.9 percent, I’m really interested in a full merger.”
Lewis and Thain spent the next half hour reviewing the various mix of businesses, the strategic rationale for a merger, and assembling some due diligence teams. Lewis suggested they reconvene with “the two Gregs”—Greg Curl and Greg Fleming—at 5:00 p.m.
“I can’t do it then,” Thain told Lewis.
Strange, Lewis thought. Thain showed up wanting to do a deal and now he couldn’t meet in two hours? Did he have somewhere better to be? Was he in talks with someone else?
As he was about to leave, Thain stopped and raised a final point: “I have to tell Hank about these conversations,” he explained, “because I’m worried that if Hank finds out about them, he’s going to think that I screwed up the Lehman deal.”
“Well, look, you know,” Lewis answered, “I would prefer the Merrill deal. You can tell Hank that we’re having these discussions, because we