Due Diligence: A Thriller (14 page)

“Not at all,” said Wilson, grinning right back.

“No surprises, I hope?”

“Only good ones, Mal.”

Mal Berkowitz laughed. “Them’s the ones I like,” he said, and he moved his eyebrows up and down quickly in what he thought of as his Groucho Marx impression.

“What is this?” whispered Stan to Lyall Gelb, who was sitting beside him. He pointed at the first agenda point. “Acquisition of BritEnergy. You know about this?”

Lyall didn’t reply.

“Ed’s allowed me to deal with the new point first up,” said Wilson. “Now, as you can see, it’s an acquisition.” He paused. “Quite a sizable acquisition. As you know, we’ve agreed on the need for a new global strategy, and that strategy is based on the idea of acquiring a partner based in the European Union who can fill the key gaps in our portfolio. Well, you may be surprised to know how far advanced we are in the process. Pleasantly surprised,” he said, with a nod to Mal Berkowitz. “There’s quite a pressure of time, which is why we couldn’t get a paper to you earlier. Lyall’s now going to give you each a copy of the relevant document, and I’m going to ask you to leave it behind in this room when you go this afternoon. Not that there’s a trust issue,” added Wilson, as Mal Berkowitz started rolling his eyes and was obviously about to make a quip. “Confidentiality’s paramount, that’s all, and we have a fiduciary duty to take the standard precautions.” He glanced at Gelb. “Lyall?”

Gelb pulled a set of documents out of his briefcase. Stan Murdoch watched him. Lyall went around the table, handing a copy to each person. He had personally photocopied them that morning, and each one was individually numbered. The document was a slightly altered version of the Dyson Whitney PowerPoint presentation that Wilson had taken to Andrew Bassett two days earlier.

The atmosphere in the room had changed utterly. There was a palpable sense of expectation.

Lyall sat down.

“What the hell is this?” whispered Stan Murdoch.

Lyall nodded toward Mike Wilson.

“I’m going to leave you while you look at the document. Please read it carefully. If you have any questions, make a note of them, and I’ll take them when I come back.”

“I have a question,” said Imogen DuPont.

“What is it?” said Ed Leary.

“You’ve given us a document to look at, Mike. What exactly are you asking us to do today?”

Leary looked at Mike Wilson.

“I’m asking you to vote on it.”

*   *   *

When Wilson came back, the atmosphere in the room was concentrated. Most people at the table were still reading through the document. Wilson had given them slightly less time than he figured they would need in order to finish it. He didn’t want discussion starting without him.

He waited a few more minutes. Then he glanced at Ed Leary. Ed cleared his throat. Imogen was still reading. She was the last to look up.

“I’m gonna take questions first,” said Wilson. He looked around, waiting for someone to start.

There was silence. That was either very good, Wilson knew, or very bad.

“Nothing?” He waited a moment longer. “Hell, I knew it was good, but I didn’t realize it was this good. Let’s take the vote right now, huh, Ed?”

Ed Leary was startled.

“Only joking,” said Wilson. “All right, let me run through everything quickly and see what we have to talk about. BritEnergy, as you will have seen by now, is a first-class company with a first-class portfolio of international assets.” Wilson turned the pages of his own copy of the document. The first couple dealt with BritEnergy, its history, reach, and operations. “Why don’t we go straight to page five?”

Page five showed a map of the world with the Louisiana Light and BritEnergy assets represented by tiny images of their corporate logos. The arc of assets ran up from Chile, through the United States, across to Britain, through Europe, and down through Asia to end in southeastern Australia.

“This just about sums up the rationale for the deal. We’re talking generating plants, wires, retail operations. I think you’ll agree this creates an impressive portfolio. In fact, I think it’s unmatched by any other company in the industry.”

“It’s the whole damn world,” murmured Mal Berkowitz. Beside him, Dave Ablett nodded.

“The deal gives us an integrated company with financials that are very robust,” said Wilson. “Turn to the next page.”

Page six showed a proforma profit-and-loss statement for the combined Louisiana Light and BritEnergy company over the next two years.

“Now, we’ve used conservative assumptions,” said Wilson. “We’ve assumed an average five percent cost savings in corporate center heads and other compressible costs. That’s certainly less than we’ll actually achieve. We think we’ll get ten, and probably fifteen percent if we squeeze. The bankers wanted to factor that in but I said no, let’s go conservative, just do the numbers with five percent. But the point is, we’re talking cost savings as well as the strategic logic of putting the two portfolios together.”

“So these figures show five percent?” asked Dave.

“Correct,” said Wilson.

“What about the balance sheet?”

“You’ll have seen that on the next page.”

Mal Berkowitz nodded. “This is good.”

“They’re very strong on the balance sheet,” said Lyall Gelb. “That’ll help us with … you know, our issues, and it means we can finance the acquisition in the capital markets and still reduce the overall leverage of the combined company.”

“I think what Lyall’s saying is their balance sheet is strong enough to carry the extra debt we’ll need to take on when we buy them,” said Wilson. He paused. The cash they would need to finance the acquisition was the big point, he knew. “Let’s go to the next page.” He waited, watching them.

“I wasn’t sure about this,” muttered Dave Ablett. He glanced at Mal Berkowitz for a second, and then scanned the page, frowning. “Is this right, Mike? You’re actually talking about—”

“Correct. Four-point-two billion,” said Wilson crisply. There was no point being defensive about it. Talk it up, like it was something to be proud of.

Dave was still studying the page. Mal, studying it as well, whistled softly. Wilson glanced at Imogen DuPont. She was watching Dave and Mal. Gordon Anderton caught Wilson’s eye and smiled.

“Let’s be clear,” said Wilson. “The offer is eight-point-three billion in stock, four-point-two billion in cash. I’m rounding a little. At current stock prices, the stock swap we agreed is around five to two. Five-point-one to two, to be exact.”

“Mike,” said Dave Ablett, “I wanted to ask you, where does this come from?”

“Which part exactly?” said Wilson.

“The valuation. We’re valuing them at twelve-point-five billion, right?”

“That comes from Dyson Whitney.”

“Dyson who?”

“Our investment bank,” said Wilson. “They’re advising us on this.”

“I thought we use Merrill.”

“Dyson Whitney has a strong electricity specialty. I’ve been a little disappointed with Merrill.”

“So this is their valuation?”

“Correct. I’ll be honest with you. We’re toward the top end of their range. But this isn’t a bargain hunt, Dave. This is a quality acquisition. I don’t want to put this company in play, I want to buy it. And I don’t want to get into a bidding war.”

“But this company … it’s kind of…”

“What, Dave? Big?” Wilson laughed. “Damn right, it’s big.”

“Maybe rather than buying it we should be looking to have some kind of a partnership.”

“You mean a merger? Why merge when we can buy ’em?”

“Can we? You’re sure?”

“Yes. I met with Andrew Bassett, the CEO of BritEnergy, in London on Monday. This is an agreed bid, Dave. These are the exact terms Bassett’s taking to his board tomorrow.”

There was silence. Only now did the board members realize how far the matter had actually advanced. It was almost a done deal.

Ed Leary watched Dave and Mal closely to see how they were going to react to that. Besides him, they were the only non-execs who gave any real input on business issues. Gordon Anderton, the headhunter guy, never had anything to say unless they got onto the soft stuff. Imogen DuPont, who had recently left the state administration, was window dressing, a potentially useful conduit to her friends in the Democratic Party. It was only her third board meeting. She knew a lot about rules and regulations and very little about business. Stan Murdoch hadn’t said anything, but Stan never said much in board meetings, and Leary didn’t expect him to. He assumed Stan must have already known about the deal. Ed Leary had no idea that Stan hadn’t been aware of it before sitting down at the board table that morning.

Lyall Gelb could feel Stan Murdoch’s eyes boring into him.

Dave and Mal glanced at each other. Like Ed Leary, they were out of their depth. These were the kind of numbers they only dreamed about. When it came to adding $4.2 billion in a single chunk of debt, they didn’t know where to start. But neither of them wanted to show it.

Imogen DuPont spoke up. “Shouldn’t you…” She looked at Ed Leary in consternation. “Shouldn’t this have been cleared with the board first? I mean, before it got to this stage?”

“Well, Imogen,” said Leary, “sometimes there are pressures of time…”

“You could have convened a telephone conference.”

“We had to move very fast on this,” said Wilson. “I don’t think we want to get caught up in the technicalities.”

“No,” said Ed Leary. He laughed a statesmanlike, paternalistic laugh. “We don’t want to get legalistic, Imogen.”

Imogen looked at the others for support. Glances shifted uneasily.

“Why don’t we move along?” said Wilson. “You’ll find some of the key staffing issues on page fourteen. I’ll remain the CEO, Andrew Bassett will be COO. Stan’s director of operations for U.S. and International. Their current COO, Anthony Adams, gets UK and Europe.” Wilson paused for an instant, glancing at Stan Murdoch. Stan was staring at the document. His jaw was set tight. “Lyall stays CFO. Their finance guy is ready for retirement and he goes.”

Lyall nodded.

“We’ll keep two heads of personnel for the moment. Makes sense given the differences between us and the UK. Our strategy position is vacant so we’ll keep their guy. Gordon, you want to put our search on hold?”

“I’ve got a shortlist, Mike.”

“Well, the shortlist just got shorter. Don’t worry, Gordon, there’s plenty of other work we’ll need doing. What else? Company counsels,” said Wilson, with a glance to Doug Earl. “Again, we’re going to keep both, given the regulatory differences.”

Doug nodded.

“Now, I know what you really want to know. As far as the board goes, initially we’ll have a shared structure. Just put the whole two boards together. Ed’ll be chairman. Their chairman, Sir James Duncan, will be deputy. All of you will be on it.”

“Where will we meet?” asked Mal.

“London and here. We’ll take turns. At some point we’ll rationalize the board.”

“But we’re buying them, right?” asked Mal.

“Definitely. Legally and, more importantly, in the business itself. We’ve got the chairman, the CEO, the CFO,” said Wilson, numbering the posts off on his fingers. “All three of the main jobs. Plus a majority of the board. Hell, I’d say that’s an acquisition, wouldn’t you?”

Mal grinned.

“But we want to do this friendly, not hostile. We’ve got to make it easy for them. The last page shows a proposed timetable for the acquisition. All going well, we see it being consummated in ten weeks.”

Mal Berkowitz let out an appreciative whistle.

“That’s right. Not bad, huh? Ten weeks, you’ll all be on the board of a twenty-three-billion-dollar company.” He glanced around the table. “Ladies and gentlemen, for a transatlantic deal, I believe this is as good as it gets.”

Wilson stopped talking.

“Questions?” said Leary. “Dave? Mal?”

There was silence for a moment.

“I guess we have to take the valuation at face value,” said Dave Ablett.

“I’d say it’s a fair price,” said Wilson. “I’m not saying it’s a steal, Dave. I’m not trying to kid you. I could’ve gone in at twelve-point-two-five, say, or even twelve, but we’d be in a bidding war and who knows where the price would go. Probably way higher. This way, we get an agreed bid and a one percent break fee.”

“One percent of twelve-point-five billion? We should hope it fails,” quipped Mal.

“No, Mal,” said Wilson seriously. “This is a good deal. At twelve-point-five, it still leaves a lot of upside.”

Imogen shook her head. “Ed? I’m still uncomfortable with the length this has got to without the board knowing.”

“Well…” Leary frowned. “What would you like to do about that, Imogen?”

“Well, I mean … should we get an independent opinion on the quality of this acquisition?”

“Imogen,” said Mike Wilson, “we really are under extreme pressure of time here.”

“Why is that, exactly?”

“Because BritEnergy is extremely anxious about being put in play. If we can do the deal in the kind of timeline I’ve outlined, they’ll go for it. It it’s going to drag on, they’ll walk.”

“That doesn’t make sense,” said Imogen.

“It makes sense,” said Dave Ablett impatiently. “That’s business. Take my word.”

Wilson glanced pointedly at Ed Leary.

“Imogen,” said Ed, “I don’t believe we have the luxury of getting an independent opinion at this stage, desirable as that might be. I think Mike has put a very professional assessment to us and I think we’re going to have to go with that. Does anyone else disagree?” Ed looked around. No one spoke up.

“Well, I’d like to register it,” said Imogen. “I’m sorry, Mike. I think this went just a little too far without the board being informed.”

“You want to register that in the minutes?” said Ed Leary.

“Yes, I do.”

“Doug,” said Ed. “You want to register that?”

Doug Earl made a note. Wilson had to stop himself from rolling his eyes. If that made Imogen DuPoint happy, fine. Lawyer stuff. Like registering something in the minutes was going to make a difference.

“Well, I guess there’s only one question then,” said Dave Ablett.

“What’s the name of the new company?” suggested Wilson.