stopped to look—to gawk, in fact. “Do you know what this is like?” Kirk asked McDade when they were finally settled. “We’re the kid with the dunce cap in the corner!”
McDade let out a big laugh just as a group of bankers they did not know from Credit Suisse wandered over, flashing wide grins, and started eyeing them. “What’s going on?” one of them asked. Kirk rolled his eyes in a way that clearly indicated,
Five minutes later a security guard came over to McDade and Kirk and told them, “We’re going to take you up to another floor so you can work.” The Fed had hoped to provide them with an actual conference room, but because there wasn’t any space available, they were escorted to the Fed’s medical center, where a makeshift office had been prepared. It was, if nothing else, all too apt a metaphor, as the Lehman executives immediately realized. Kirk looked at the defibrillator on the wall and deadpanned, “Well, this is appropriate. We’re clearly the heart attack victim.”
Greg Curl and Joe Price of Bank of America were on their way downtown with their lawyer, Ed Herlihy, for a 10:00 a.m. meeting with Paulson and Geithner. They had by now resolved not to pursue a deal with Lehman; Curl had already sent some of his people back to Charlotte.
Before they arrived, Herlihy’s cell rang; he could see from the caller ID that it was Fleming. For a moment, he hesitated answering.
Before they had left, the group had discussed what to do if Fleming called again. Chris Flowers had advised Curl, “Let’s not waste another fucking minute on this until John Thain himself calls Ken Lewis and says the words out of his own mouth: ‘I want to do this deal.’ Otherwise, it’s just a bunch of bullshit.”
Exasperated, Herlihy finally answered the phone.
“We’re going to make this happen,” Fleming said excitedly. “John says we should set it up.”
Herlihy had heard this before and had grown tired of the routine.
“Greg, I’ve said it once and I’ll say it again: We’re not doing this without being invited in. I’m actually in the car with Greg Curl now. I’ll put him on. He’ll tell you we’re serious about that.”
“Listen, we’re interested,” Curl said after being handed the phone. “But we do need to hear from Thain directly on this.”
“Okay, okay,” Fleming told him. “I’ll call you back.”
For all their interest in acquiring Merrill Lynch, Curl, Price, and Herlihy had reason to be wary of Fleming’s overtures. The three men knew something that no one else knew, a bizarre turn of events that had never leaked out—
Ken Lewis had, in fact, already been through this dance with Merrill Lynch a year ago almost to the week with Stan O’Neal. No one outside of O’Neal and a handful of BofA executives even knew the talks had taken place, and not even Merrill’s or Bank of America’s board had been informed of them.
On the last Sunday of September, O’Neal had driven down to Manhattan from his weekend home in Westchester to meet with Lewis at his plush corporate apartment in the new Time Warner Center. The meeting had been set up by Herlihy, who had acted as an intermediary. O’Neal showed up alone, though—Lewis had brought Curl with him.
As a precondition of the meeting, O’Neal had indicated that he wanted $90 a share for Merrill Lynch, a substantial premium over its then stock price of slightly more than $70 a share. Lewis and Curl got right down to business, handing O’Neal a bound presentation of what a combination of Bank of America and Merrill would look like from a numbers and operational standpoint. As Lewis went through the proposal and was ready to start a discussion, O’Neal jumped out of his chair, excusing himself to go to the bathroom. After what felt like twenty minutes, as Lewis and Curl waited anxiously for him to return, they wavered between concern for O’Neal’s health and frustration that he seemed to have vanished.
Finally, O’Neal returned, as if nothing unusual had occurred. Lewis shrugged it off and continued going through the presentation. As he continued, O’Neal stopped him.
“Look, if we’re going to do a deal, it’s going to have to be at a reasonable premium,” O’Neal said, raising the price he wanted for the firm to $100 a share. “I’ve done some subsequent analysis and thought about it more,” he said, explaining how he justified the higher price by a sum-of-the-parts analysis of Merrill’s asset management, retail, and investment banking businesses.
The number took Lewis aback. At first he almost ended the conversation. But then he allowed that he would continue the talks, but suggested if O’Neal wanted more money, “it would require more cuts.”
“How much cost reduction do you have baked into the numbers that you have?” O’Neal asked.
Lewis’s presentation projected $6 billion in cuts over two years.
To O’Neal that was a huge number, even for someone who had been famous for his own cost cutting. And if he wanted $100 a share, it would be even more.
O’Neal asked, “So, how would you see me fitting into this?”
“Well, you’d be part of the management team, but I haven’t really thought about a structure,” Lewis told him.
That answer clearly was unsatisfactory. If they were going to have to reduce costs by as much as Lewis was saying, O’Neal said, he’d want to be the president of the firm so that at least somebody would be looking out for the Merrill employees. Lewis now became angry. “So, what you’re sayin’ is, you want me to sell out my management team to get this deal done for your benefit?”
For a moment O’Neal only stared down at his feet, until finally saying, “I appreciate you spending the time. I
