Due Diligence: A Thriller (2 page)

Stanzy nodded.

“Didn’t you pitch Florida G and L to me one time?”

“See what you missed out on?” replied Stanzy.

Wilson laughed. “Hell, Pete, that’s a chickenshit operation.”

Stanzy sat forward. The opening was there and he decided to take it. “I’ll tell you something, Mike. You could have it for nine hundred million.”

“Really?”

Stanzy nodded. “Florida’s just using Hale to flush out the bidders.”

“Hell they are!”

“You want me to talk to them?”

“Always trying, aren’t you, Pete?”

“I’m telling you, Mike, there’s an opportunity here. I can’t divulge everything I know,” said Stanzy, his voice dropping slightly as if he were about to tell Wilson something especially confidential, “but let’s just say I’ve had some discussions, and I can tell you for sure that nine hundred will get you in the game. Now, I know in the past I said you could get it for seven, but the market’s moved on. The point is, we have to act fast. Go in over the top with an aggressive bid, blow everyone else out of the water. Trust me, that’s the strategy for this one. That’s how to take it. Nine hundred, Mike. Let’s put it on the table and it’s yours.”

Wilson gazed at him for a moment, as if considering it. Then Stanzy saw that the other man was toying with him. Wilson laughed again. “You talk to them if you want, but not about me. I’m not interested. I got other fish to fry.”

Stanzy sat back. Didn’t look like he had a hope in hell of getting Wilson to bid for Florida Gas & Light. It was going to be one of these free advice sessions. Another one. Stella brought the coffees. She was an efficient woman of about fifty with dark hair in a bun, neat figure in a cream-colored dress.

Stanzy gazed out the window as she poured the coffees. It wasn’t a view of the Mississippi you’d see in any tourist brochure. Barges, factories. Industrial.

“Cream?” said Stella.

“Thank you, Stella,” said Wilson. “We can manage.”

Stella put the jug down and left.

Wilson waited for her to close the door, then turned back to Stanzy. He gestured at the cream jug. Stanzy shook his head. He picked up his coffee and took a sip of it, black.

Wilson was watching him.

“I appreciate you coming down,” he said.

Stanzy nodded. “What can I do for you?”

Wilson’s eyes narrowed. “I got a deal in mind.”

Stanzy set his coffee down. “What kind of deal?”

“We’re confidential, right?”

Stanzy nodded.

“You ever heard of a company called BritEnergy?”

Stanzy tried to conceal his surprise. BritEnergy was one of the larger electricity companies in Britain, worth at least as much as Louisiana Light itself.

“At current stock prices, they’re valued slightly higher than us,” said Wilson, as if reading Stanzy’s mind.

Stanzy nodded. “I didn’t pitch BritEnergy to you.”

“Someone else did.”

“Who?” asked Stanzy, hoping like hell it was Citibank.

“Doesn’t matter.”

Mike Wilson stood up. He walked across to the window and stood looking out.

“My board feels the company needs to take a new strategic initiative. We need a major acquisition. Until now, we’ve been opportunistic, incremental. We’ve created our portfolio by buying an asset here or an asset there.”

“Seems to have been pretty successful.”

“At this point, we’ve gone as far as we can go like that,” continued Wilson, ignoring the interjection. “We’ve become a global player, after a fashion, but for a global player we’re still too small. If we continue taking a piecemeal approach, our reach is always going to be limited. There are gaps we’re not going to be able to fill. It’s time for us to leapfrog our growth. We need to establish a platform so we can double and double again. That’s my vision, Pete. The only way to do that is to acquire a sizable company that can fill the gaps we have. In particular, my board feels we need a major strategic presence in the European Union and they’ve tasked me with the job of making that happen.”

Stanzy watched Mike Wilson’s back.
My board feels
 … Stanzy knew what that meant. Mike Wilson’s board was stuffed with more friends and well-wishers than your average wedding party.

Wilson turned around. “Your thoughts?”

Stanzy shrugged. “Mike, you haven’t given me anything to think about yet. If you want a strategy talkfest, go to McKinsey. When you’re ready to do a deal, come to me.”

Mike Wilson smiled. He came back and sat down. “BritEnergy.”

“You’re looking at some kind of merger?”

Wilson shook his head.

Stanzy stared at him. “You want to buy it?”

“You got it. An acquisition, but a friendly one.”

“What makes you think they’re interested?”

“The strategic fit is fantastic. Our portfolios are complementary, like a hand and a glove. Hell, Pete, put our two sets of assets together, you get a map of the known world.”

“What makes you think they’re interested?” repeated Stanzy.

“Let’s just say there have been discussions.”

“What kind of discussions?”

“Early discussions.”

“Price?”

Mike Wilson shook his head.

Stanzy didn’t reply. There was no such thing as a discussion without price. That wasn’t a discussion, it was just words. He watched Wilson with irritation. This was just bullshit. Wilson had gotten him down here to run the idea past him and see how he’d react, just as he’d expected. Pete Stanzy had been to Baton Rouge way too many times to do this again.

“You seem skeptical,” said Wilson.

“Not at all. I’m sure it does make a lot of sense. So does putting Chevron together with ExxonMobil. And Toyota with Ford. So do a lot of things. The only problem is, both sides have to want a deal or it doesn’t matter how much sense it makes.”

“Pete, there have been discussions. I can’t tell you any more right now. There have been serious discussions.”

“All right,” said Stanzy. Mike Wilson was still a potential client, even though he had just gotten him to come all the way down to Baton Rouge for what was turning out to be a monumental waste of his time, and Stanzy was trying to be patient. But his irritation was getting the better of him. “What is this, Mike? You want advice from me on this thing? You want me to tell you what I think?”

“I don’t need you to tell me what you think. I know what to think.”

“Then what do you want?”

“I told you what I want, Pete. I want to buy BritEnergy.”

“Then let’s cut to the chase. Are you looking for a pitch here? Is this going to be a beauty parade? Who else are you talking to? Merrill? Goldman? Morgan Stan—”

“What I’m looking for,” said Wilson, cutting across him, “is to do this deal very quickly and very quietly, in exactly the way I want it done.”

Stanzy’s eyes narrowed. It was beginning to dawn on him that this might not be a monumental waste of time at all. Suddenly, it seemed as if Mike Wilson might actually be talking about something very real, very immediate. And very big.

All at once, Stanzy was powerfully alert. He just hoped he hadn’t rubbed Wilson the wrong way by being so brusque with him.

“How quickly?” he asked.

“Quickly. Can you do it? I want the best team you can field.”

“You’re not talking to anyone else?”

“I don’t have time for a beauty parade.”

No time for a beauty parade? Pete Stanzy didn’t quite believe that. For a deal this size, every bank on Wall Street would scramble. Wilson could have Goldman Sachs, Merrill Lynch, Citibank, Morgan Stanley, all of them strutting their stuff inside forty-eight hours.

“Mike,” said Stanzy carefully, still looking for the catch, “you’ve got a relationship with Merrill Lynch, right?”

“That’s right,” said Wilson.

“And you’re telling me you’re not even talking to them?”

“My relationship with Merrill Lynch didn’t stop you coming down here and pitching me all kinds of chickenshit like Florida G and L.”

“But I didn’t pitch you this one.”

“You want me to go to Merrill? Is that what you’re saying, Pete? Are you telling me Dyson Whitney can’t handle a deal this size?”

“No,” said Stanzy hastily. “We can handle it. Absolutely.”

“Then I would have thought you’d kind of want the business.” Wilson raised an eyebrow meaningfully, watching him.

Stanzy frowned. “They know you’re interested? BritEnergy, I mean.”

“I want to have the whole thing agreed in a month,” replied Wilson, which wasn’t exactly an answer to the question.

Pete Stanzy looked at him skeptically. In a month?

“I told you. I wasn’t joking when I said I want it done quick. And quiet. All right, Pete, let’s cut to the chase, as you said. How much?”

Stanzy’s mind raced, running the angles. The whole scenario was highly unusual, to say the least. By any standards, this was a big deal—by Dyson Whitney’s standards, a huge one. For a deal of that size, you’d normally expect to offer a discount on the fee. Twenty basis points, 0.2 percent of the price paid for the target, was what you’d probably get as an advisory fee. Maybe only fifteen. You might start by asking for thirty basis points and let the client beat you down to twenty. Maybe he should start low right away to make sure he got it. But who was he competing with? For whatever reason, Wilson was offering him the deal on a platter. No beauty parade, no competitive pitch. He was almost begging him to take it. So maybe he should start high. Thirty-five? Maybe even forty? But Wilson might get pissed. And however much Wilson wanted Stanzy to handle this deal, he couldn’t possibly want to give it to him as much as Pete Stanzy wanted to have it. He
had
to have it. So go low. But why should he? Wilson wanted him to have it.

“Pete?”

“Forty basis points,” said Stanzy impulsively, almost wincing even before the words had come out.

There was silence.

Stanzy wished he could take those words back, make it thirty. Jesus, why hadn’t he made it thirty? Or twenty?

“Done,” said Mike Wilson.

Pete stared at him in disbelief.

“But nothing if we don’t win,” said Wilson. “You got that? Don’t give me any of that retainer shit, Pete. I don’t care how many shareholder votes we get—if we don’t get to the takeover threshold, there’s nothing in it for you.”

Oh, we’ll win, thought Stanzy. And he would be a legend. The man who got forty basis points on an eleven-billion-dollar deal. He did the math. In about a second. Forty-four million in fees.

“I’ll send you a draft letter of engagement tomorrow,” said Stanzy. “In the meantime, we’ll get right on it. It’s Thursday today … you’ll have a first cut of the valuation on Monday. That soon enough? We’ll meet.”

Wilson nodded. “I’m running down to Colombia tomorrow to check out our operation down there. I try to get down there once a quarter. Probably run over into Saturday. Monday’s good. Set up a time with Stella.”

“Okay. Mike, what are your thoughts on how you’re going to finance the deal?”

“Stock and cash,” said Wilson. “Say three-fourths and one-fourth as a starting position.”

“That’s one-fourth cash?”

“That’s right.”

“You got that or are you going to have to raise it?”

Wilson didn’t bother answering that question.

“So how you gonna raise that? Debt or equity?”

“Debt.”

Stanzy nodded. One-fourth cash. Say 2.8 billion. He did the math. Say fifty basis points arranging fee on the debt. That was another fourteen million in fees right there.

Stanzy pulled out a notebook. “Who do we talk to?”

Mike Wilson didn’t reply.

“Who’s on your team? Finance guy? Head of strategy? Who do my guys talk to?”

“No one,” said Wilson. “Me. You talk to me.”

“But my guys are going to need someone to—”

“Your guys talk to me. If you need to talk to someone else, ask me.”

“But you must have had people working on this,” said Stanzy.

“I don’t think you understand, Pete. I said I wanted this done quietly, exactly the way I tell you to.”

“Okay. I understand, Mike.”

“Do you?” Wilson watched him carefully.

Pete Stanzy put his notebook away. For forty basis points, he’d do it blindfolded and standing on his head if he had to. “We’ll talk to you, Mike,” he said. “No one else.”

3

His cell phone was in his pocket, but Pete Stanzy resisted the temptation to take it out. He kept his face blank. Never say a word in front of a company driver, he knew. Never give a hint of what you’re feeling. And never, ever,
ever
pull out your cell phone. Do that, and before you know it you’re wrapped up in the conversation and you’ve forgotten there’s anyone listening in the front seat.

Instead, he sat in silence as he was driven back to the airport, running the numbers in his mind. Savoring them. Forty bips on the advisory fee, on a price of 11 billion. That was 44 million. Another 14 million for selling the bonds that would provide the debt. Fifty-eight million. And they’d need a bridge loan while the bond sale was arranged. Dyson Whitney didn’t have the capital to provide a bridge of 2.8 billion, or anything like it. They’d have to go to one of the majors for that. The usual premium on a bridge loan was 4 percent. Say Dyson Whitney got a 25 percent cut of that. Say the loan was paid out in six months. That was another 14 million. Add that to the fifty-eight, and the total fee to Dyson Whitney was 72 million. Say a round 70. Seventy million for the firm—of which around 6 million would go straight into his own bank account as bonus out of the fee.

Pete forgot the eyes of the driver watching in the rearview mirror for a moment, and smiled. Not bad for a morning’s work.

These were big numbers. The kind of numbers you’d deal with at a Morgan Stanley, at a Goldman Sachs, not at a third-tier bank like Dyson Whitney. On the scale of acquisitions, it wasn’t exactly an AOL and Time Warner, but it wasn’t chicken feed. In any given year—in a good year—there might be a total of a couple of hundred deals of this size worldwide. Right now there were probably half that number or less, and the first-tier banks got just about all of them. Stanzy couldn’t wait to see John Deeming’s face when he heard about this. He forgot himself and smiled again. Good-bye, Dyson Whitney. Do a deal like this, and who knew which bank might not come looking for him?