Perelman

"Then, in 1978, at age thirty-five, he decided to venture out. He borrowed $ 1.9 million to buy 34 percent of Cohen-Hatfield Industries, a jewelry distributor and retailer with $ 49 million in revenues that year. In 1980, Cohen-Hatfield spent about $ 45 million to buy MacAndrews and Forbes, a maker of chocolates and licorice extracts, and the Cohen-Hatfield name was dropped in favor of MacAndrews. In the fall of 1980, MacAndrews issued its first batch of junk bonds, a modest $ 33 million, underwritten by Drexel with Bear, Stearns. Over the next four and a half years, Perelman set out on a wholly leveraged, though relatively small-time, acquisition trail. He tried and failed to acquire the Richardson Company and the Milton Bradley toy and game company, but he made money in both transactions. He succeeded in buying, for a total of about $ 360 million, Technicolor, Inc., the film processor; Video Corporation of America, a major manufacturer of home videocassettes; the film-processing assets of Movie Labs; Consolidated Cigar; and a controlling interest in Pantry Pride. Roughly $ 140 million of this money came from Drexel junk-bond offerings, the rest from banks—and all built on that original (borrowed) $ 1.9 million, back in 1978."

"In line with the Drexel tenet that people work best when they have an ownership stake, Perelman had made Drapkin a principal in this deal. In June ’85, the board of Pantry Pride had loaned Drapkin money to buy Pantry Pride convertible debentures. For a lawyer to become a principal in a deal with a client was a first at Skadden and a practice not followed at any other major New York law firm. It enraged some of Drapkin’s partners, but it was a measure of his new clout."

"Perelman’s plan, at least at the start, was to do here what he had done on a much smaller scale in his earlier acquisitions, with Technicolor perhaps the best example: acquire the company with virtually all debt and then sell off the pieces he didn’t want, using the proceeds from their sales to pay down the debt and getting the remaining business virtually for free. Perelman made this plan explicit in his tender-offer document, stating that Pantry Pride believed it might be able to realize up to $ 1.9 billion—the total of his offer, at the starting $ 47.50 per-share price—from the sale of substantially all the assets of Revlon, excepting the beauty business. And it was, obviously, necessary to firm up these divestiture prices as much as possible, for Perelman—and, more to the point, Drexel—to know just how much they could afford to bid."

"Pantry Pride, meanwhile, cognizant of the deal that was in the works, was desperately trying to entice Bergerac. Don Engel enlisted Harold Geneen, Bergerac’s old boss at ITT, to pay Bergerac a visit. Geneen, on behalf of Pantry Pride, offered to give Bergerac his parachute, as Perelman had offered before; to give him a second one, which he would be able to cash in in two years; and then to sell him a division, one of the health divisions of his choice, at a favorable price, and finance it for him. “He didn’t spell out favorable price, but these things are understood,” said Bergerac. “So the package they were offering came to close to a hundred million dollars.”"

"In March 1984 Perelman took the company private, with Drexel raising the $ 95 million that the deal required. Then, the next fall, he became enamored of the huge tax-loss carryforward, or net operating loss, in Pantry Pride. He reasoned that this NOL not only could be put to good use in sheltering the income of any company he might acquire, but would give him a substantial advantage in a bidding war."

"IN SEPTEMBER ’86, in the opulent Revlon offices where he and “the Drexels” had arrived as hated interlopers and dropped ashes on Bergerac’s Persian rugs, Perelman now seemed at home. He and Drapkin had liked calling attention to Bergerac’s excesses, particularly the Boeing 727 outfitted with a gun rack for his safaris, and the Revlon offices in Paris which Perelman described as a “castle.” Now the company leased its corporate jet from a Perelman aircraft-leasing company. And now that the “castle” was his Paris headquarters, Perelman had decided not to sell it, after all. He was having the New York offices redecorated. And James, Bergerac’s butler, was now serving Perelman."

"The other reason Perelman wanted to take MacAndrews and Forbes private, one associate said, was that he wanted “to do some things which might be criticized in a public company—have his own plane, have his artwork in his office. He wanted to have [MacAndrews and Forbes] as his nest egg—and then he wanted to acquire some other public company, for presenting his face to the financial world.”"

"Perelman chose companies that were strong cash-flow generators and that had problem assets that could be sold off—quickly paying down much of the high-interest debt—leaving the pared-down, profitable core business."

"Then, in 1978, at age thirty-five, he decided to venture out. He borrowed $1.9 million to buy 34 percent of Cohen-Hatfield Industries, a jewelry distributor and retailer with $49 million in revenues that year. In 1980, Cohen-Hatfield spent about $45 million to buy MacAndrews and Forbes, a maker of chocolates and licorice extracts, and the Cohen-Hatfield name was dropped in favor of MacAndrews. In the fall of 1980, MacAndrews issued its first batch of junk bonds, a modest $33 million, underwritten by Drexel with Bear, Stearns. Over the next four and a half years, Perelman set out on a wholly leveraged, though relatively small-time, acquisition trail. He tried and failed to acquire the Richardson Company and the Milton Bradley toy and game company, but he made money in both transactions. He succeeded in buying, for a total of about $360 million, Technicolor, Inc., the film processor; Video Corporation of America, a major manufacturer of home videocassettes; the film-processing assets of Movie Labs; Consolidated Cigar; and a controlling interest in Pantry Pride. Roughly $140 million of this money came from Drexel junk-bond offerings, the rest from banks—and all built on that original (borrowed) $1.9 million, back in 1978."

"IN SEPTEMBER ’86, in the opulent Revlon offices where he and “the Drexels” had arrived as hated interlopers and dropped ashes on Bergerac’s Persian rugs, Perelman now seemed at home. He and Drapkin had liked calling attention to Bergerac’s excesses, particularly the Boeing 727 outfitted with a gun rack for his safaris, and the Revlon offices in Paris which Perelman described as a “castle.” Now the company leased its corporate jet from a Perelman aircraft-leasing company. And now that the “castle” was his Paris headquarters, Perelman had decided not to sell it, after all. He was having the New York offices redecorated. And James, Bergerac’s butler, was now serving Perelman."

"In March 1984 Perelman took the company private, with Drexel raising the $95 million that the deal required. Then, the next fall, he became enamored of the huge tax-loss carryforward, or net operating loss, in Pantry Pride. He reasoned that this NOL not only could be put to good use in sheltering the income of any company he might acquire, but would give him a substantial advantage in a bidding war."

"Asked when he conceived of the megaleap he made with Revlon, Perelman replied that it was “a process of bites.” No, he did not have this trajectory in mind when he started out in 1978 to buy the jewelry company, Cohen-Hatfield. “Go back to 1978: even if we’d defined it, we couldn’t have funded it,” said Perelman, who refers to himself in the first person plural. “This could not have been done without Drexel.”"

"The other reason Perelman wanted to take MacAndrews and Forbes private, one associate said, was that he wanted “to do some things which might be criticized in a public company—have his own plane, have his artwork in his office. He wanted to have [MacAndrews and Forbes] as his nest egg—and then he wanted to acquire some other public company, for presenting his face to the financial world.”"

"Pantry Pride, meanwhile, cognizant of the deal that was in the works, was desperately trying to entice Bergerac. Don Engel enlisted Harold Geneen, Bergerac’s old boss at ITT, to pay Bergerac a visit. Geneen, on behalf of Pantry Pride, offered to give Bergerac his parachute, as Perelman had offered before; to give him a second one, which he would be able to cash in in two years; and then to sell him a division, one of the health divisions of his choice, at a favorable price, and finance it for him. “He didn’t spell out favorable price, but these things are understood,” said Bergerac. “So the package they were offering came to close to a hundred million dollars.”"

"Perelman’s plan, at least at the start, was to do here what he had done on a much smaller scale in his earlier acquisitions, with Technicolor perhaps the best example: acquire the company with virtually all debt and then sell off the pieces he didn’t want, using the proceeds from their sales to pay down the debt and getting the remaining business virtually for free. Perelman made this plan explicit in his tender-offer document, stating that Pantry Pride believed it might be able to realize up to $1.9 billion—the total of his offer, at the starting $47.50 per-share price—from the sale of substantially all the assets of Revlon, excepting the beauty business. And it was, obviously, necessary to firm up these divestiture prices as much as possible, for Perelman—and, more to the point, Drexel—to know just how much they could afford to bid."