Too Big to Fail [183]
“I’m thinking we announce Monday morning,” Fleming said.
“That’s very quick,” Curl replied, taken aback by the timetable.
“You know the company really well,” Fleming answered. He was one of the few people who were aware that Merrill’s former CEO Stanley O’Neal had talked to Lewis about a merger, though he didn’t know all the details. “I know all the work you’ve already done. I’ll open up everything. Just tell me what you need.”
For the next half-hour they drew up a process that would enable Bank of America to examine Merrill’s books within literally twenty-four hours. Curl, who dusted off the work he had done a year ago for the talks with O’Neal, said he was going to bring Chris Flowers in to advise him, as Flowers had recently looked into buying some of Merrill’s toxic assets over the summer (assets that were ultimately sold to Lone Star National Bank), so he would have a head start. Bank of America already even had a code name for the deal: “Project Alpha.”
Before the meeting broke, the issue of price was raised. Fleming boldly declared that he was looking for “something with a 3-handle,” by which he meant $30 a share or more, which represented a 76 percent premium over Merrill’s share price of $17.05 on Friday. It was a shockingly high number, especially in the context of the greatest financial crisis of the firm’s history, but Fleming felt he had no choice: Merrill had just sold $8.55 billion of convertible stock a month earlier to big investors like Singapore’s state-owned Temasek, at $22.50 a share. He needed to get them a reasonable premium.
For most bankers, a number that high would have stopped the talks in their tracks, but Curl understood the rationale behind the price that Fleming was seeking. Fleming argued that Merrill’s shares were temporarily depressed and that he needed a price that reflected a “normalized basis.” Just a year and a half ago, he reminded him, Merrill’s shares were trading at more than $80.
Curl had a strong view about takeovers: You never want to overpay, but if you believe in the business, you’re better off paying more to guarantee you own it then to lose it to a competitor.
“Okay,” Curl said, not committing to Fleming’s number, but clearly indicating that he wasn’t going to reject it altogether. “We’ve got a lot to do.”
The weather was beautiful for a late Saturday-night dinner on the patio of San Pietro’s, the southern Italian restaurant on East Fifty-fourth Street off Madison Avenue. During the weekday the restaurant plays host to Wall Street bigwigs over lunch: Joseph Perella of Perella Weinberg, the dean of the M&A banking business, has a table there; other regulars include Larry Fink, chief executive of BlackRock; Richard A. Grasso, the former chairman of the New York Stock Exchange; Ronald O. Perelman, the chairman of Revlon; and David H. Komansky, the former chief executive of Merrill Lynch; and even former president Bill Clinton and his pal Vernon Jordan.
Tonight Mack and Morgan Stanley’s management took a quiet table outside. For Chammah it was an opportunity to unwind and smoke a cigar. It had been a draining twenty-four hours.
Gerardo Bruno, a big personality from southern Italy who owns the restaurant with his three brothers, showed the group to their table. Mack took his blazer off and threw it over the back of his chair. Soon, Paul Taubman, Colm Kelleher, and Gary Lynch met them there. There was a lot to talk about.
After ordering a bottle of Barbaresco they launched into a postmortem of the grueling day, specifically the last crazy hour with Merrill Lynch, with Mack recounting the meeting with Thain for the benefit of those who hadn’t been in the room with him.
“And then he says, ‘Can you do it in twenty-four hours?’” Mack reported as the table erupted in laughter.
“No fucking way,” Colm Kelleher said.
Once the laughter died down, Mack raised the biggest question before them: Given the scope of the crisis now enveloping the industry, did they need to do a deal?
Chammah spoke up first. “Listen, there are not too many