Chương 130: Book 4 - Chapter 13 B

Later that month I flew out to New York to track down Martin Davis. The merger of Time, Warner, Paramount and American Wireless had left him with ten percent of the control shares for the new merged company, plus a significant personal holding of the common stock. He was still in New York, but had moved to manage the divestitures of the entire group, eliminating the divisions in the new conglomerate that didn't align with the Media focus. I could have just called him up and asked him to fly out.

He would have, but doing it this way was better. I gave a light knock on his door, and he yelled back, "Go away Agnes, I'm busy." His secretary gave me a smirk, and I stuck my head in.

"Howdy!" I told him. He looked up in surprise, brow furrowed as he read whatever report was taking his attention.

"John? What are you doing here?" he asked.

"Can I come in?" I asked.

"Sure, come in, and find a seat. It's probably under those papers somewhere." I moved a stack of papers and sat in front of his desk.

"So how's divestitures going?" I asked him.

"Just about done. I got two offers for a pencil factory. I don't remember at the moment who it belonged to, but a pencil factory! I'm trying to figure out which is better, but they are both so different, that I haven't figured it out yet," he said, setting the paperwork down.

"So what do you need?" he asked.

"It could have been a phone call, but I wanted to see you in person."

"It's ARCO, right? It's all over the WBN. They say nice things about you, but you can tell they are confused. They don't know why you'd buy ARCO of all things. Are you trying to put Standard Oil back together?"

"No, Martin. I'm doing something even bigger. I need to borrow your expertise. Between now and the end of the year I need you to sell every single asset that ARCO has that isn't oil or involves drilling, transport of crude and refining. I'm going to turn it into a lean machine that only transports refined products and sells them to the consumers." Martin leaned back in his leather chair. He let out a low whistle while staring at me as if I had just suggested we sell the moon for scrap metal.

In the high-stakes world of mergers and acquisitions, what I was describing was more than just a divestiture. It was a corporate amputation.

"John, do you have any idea what you're asking?" Martin asked, rubbing his temples.

"The drilling and refining are the heart and lungs of an oil company. You're asking me to sell the lungs and keep the skin. Without the crude, you're just a glorified trucking company with some expensive real estate in the form of gas stations."

"I'm keeping the blood vessels, Martin," I replied.

"The pipelines and the retail network. I don't want the mess of the oil fields or the liability of the refineries." He stood up and walked to the window, looking out over the New York skyline. Martin turned back to me, and that shark-like grin I remembered from the TWP merger returned to his face.

"It's madness, John. Absolute madness. But from a purely transactional standpoint? It's a masterpiece. You'll be the only 'oil' company on the planet with zero exposure to oil spills or drilling disasters. You'll have more cash on hand than some small nations."

"Not exactly," I corrected him. Sharing the one piece of news that WBN didn't have.

"I mortgaged TWP, Euro Motors and other stock to get the loan that bought ARCO. That cash needs to go back to paying for that purchase. It won't be enough to cover the $30 billion I spent, but it'll get me part way there."

"$30 billion," Martin whispered, the grin fading into a look of pure calculation. He started scribbling numbers on a legal pad.

"John, you didn't just buy a company. You jumped out of a plane and you're trying to knit the parachute on the way down."

"The parachute is the divestiture, Martin," I said firmly.

"It has to be," he agreed, nervously tapping his fingers against the desk.

"If we don't move these assets fast, the interest on those mortgages will eat you alive. This isn't just a cleaning of the books anymore. This is a debt-liquidation event. That changes our leverage with the buyers."

"How so?" I asked.

"We can't be seen to be desperate," Martin said, his eyes narrowing.

"If I call David Koch and he smells blood, he'll offer me fifty cents on the dollar and wait for the banks to foreclose on you. We have to frame this as you choosing to pivot to high-tech, not being forced to pay for your dinner."

"I got an LTV of 50 percent on $65. 5 billion in stocks. $30 billion went to ARCO. The rest are the funds that cover me until I have to start paying out of pocket. The quicker you sell, the longer that goes. If I can get past July of next year, I'm golden. Right now I hit the wall in May and that's not long enough. Everybody will know why I'm doing this on January 1st." Love this story? Find the genuine version on the author's preferred platform and support their work!

I opened up a manila envelope and pulled out a stapled stack of papers.

"The prices will be highest before then, so that's the sell by date," I told him, laying out the key dates and handing him a list of every asset ARCO owned that I didn't absolutely need. Martin's eyes darted between the numbers on his notepad and my face. He was doing the math in real time. A $32. 75 billion credit line gave me about $2. 75 billion in cash reserves after the ARCO purchase. At 12. 6% interest, I was burning roughly $315 million a month. That reserve was a fuse that I desperately needed to be longer.

"January 1st," Martin repeated, tapping his pen.

"You're giving me four months to move a mountain of steel and oil leases. If we wait until the new year, the cat is out of the bag and the market shifts. But if I move now, I'm selling 'legacy' assets to guys who think they're the smartest people in the room for taking them off your hands." Martin took a breath and let it out. This is why I came to him. That brilliant mind was already at work. He quickly started drawing lines on the paperwork.

"Okay, John, here is the reality," he said, turning the paper so I could see his marks.

"This isn't a list. This is a sequence. If we dump everything at once, we look like we're in a panic. We have to play this like a symphony."

"First, we go for the Mining Group," Martin said, stabbing the page at the Anaconda Copper holdings and the coal leases.

"These are 'safe' industrial plays. They are massive, they are profitable, and they have nothing to do with your 'energy vision.' I can move these to the Kochs or even RTZ in London by the end of September. It's a clean break and it tells the market you're focusing on oil, which keeps them from getting suspicious."

"Next, we look at the ARCO British holdings in the North Sea," he continued.

"BP and Shell are in a land grab over there. I can start a bidding war that will have London calling us before the sun goes down. At the same time, we dump ARCO Solar. Solar is a joke right now, a tax write-off for people with more money than sense. We sell it for the patents and the PR, making it look like you're 'cleaning up' the portfolio."

"Actually I'd like to keep the solar," I told him.

"It's really needed in the South Pacific. If we have to, we'll sell the factories, but keep the patents. Everything on that list though can be sold if we need to." Martin leaned back, his eyes moving back to the folder on his desk. He started tapping a rhythm against the wood with his knuckles, a sign he was putting together a play. He crossed out the note to sell the solar patents.

"This is the heart of the beast, John," Martin said, his voice dropping as he pointed to the E&P assets—the rigs, the Alaskan North Slope leases, and the heavy refineries.

"This is what Exxon and Chevron think you bought the company for. If I market these as 'undervalued reserves' that you're too 'tech-focused' to manage, they will fight to take them. But we have to wait until November. We need the Mining and International cash in the bank first so we can negotiate from a position of strength." He suddenly smiled big. He'd had an idea, something unexpected, and exactly why I'd come to him.

"You know, John," he said, looking at the list again.

"You say you want a lean machine, but you have left ARCO Chemical on the must sell pile. If you want to build a modern empire, that might be a mistake. ARCO Chemical is a powerhouse in things like propylene oxide and styrene monomer. They are currently the world leader in several specialty oxygenates."

"It's a lot of debt, Martin," I reminded him.

"I need the cash."

"Then don't sell the whole thing," he countered, his eyes lighting up.

"Listen to me. If we take ARCO Chemical public as an IPO, we can net you maybe five to seven billion dollars in cash right now. We sell sixty percent to the market, and you keep forty percent and the board control. It keeps the asset in your orbit, it gives you access to their labs, and it provides a massive chunk of change to feed the bankers.

"It also makes you look like a financial genius. You aren't just selling off parts like a crazy person. An IPO is unlocking value. The market loves a good carve-out IPO. It would actually drive the price of your other assets up because people will think you are a master of the portfolio."

"Keep forty percent and still get seven billion?" I asked, leaning forward.

"Exactly," Martin said, scribbling a new set of numbers.

"But for me to price this IPO right and convince the boys at Goldman, I need to know what the end game is. Does the world end on January 1st?"

"I can't tell you that here, Martin. Not in an office in New York where Agnes might be listening or the walls might have ears."

"You don't trust me?" he asked, though he didn't sound offended. In his world, trust was a luxury.

"I trust you with my money, Martin. But this is bigger than money. If you want the full briefing, you'll have to come to San Diego. I have a secure room there. Otherwise, you'll just have to wait until January 1st like everyone else. You'll just have to trust the guy who turned balloons into $25 billion dollars and sold them on the same week your stock crashed." Martin stared at me for a long beat, trying to read my face for any hint of a bluff. Finally, he sat back and let out a short, sharp laugh.

"San Diego," he muttered, shaking his head.

"You are giving me a heart attack, but you've never been wrong yet. Fine. I'll get the visionary lunatic story moving for the drilling rigs, and I'll start the paperwork for the Chemical IPO."

"That's why you're the best, Martin," I told him.

"You're going to create the FOMO. Fear Of Missing Out. Tell them I'm moving toward clean energy and I'm dumping the oil assets at a fair price because I'm a visionary who believes the world doesn't need oil. They'll eat it up."

"They'll think you're the next Howard Hughes, locked in a room with your balloons and your dreams," Martin laughed.

"I'll make the Kochs think they're robbing you blind of your oil while you're distracted with your South Pacific island paradise. But you better be ready for me when I land in California."

"I'll be ready," I said, standing up and reaching across the desk.

"I'll show you why I'm not just buying a company. I'm buying the next century."

"If you can clear ten billion in sales before October, we pay down the principal and the interest drops," I told him. Martin was already reaching for the telephone.

"That pushes your golden date from June to September or even further out. It gives you all the breathing room you need to roll out whatever genius idea you've had now without a bank breathing down your neck. Agnes!" Martin yelled toward the door.

"Cancel my lunch with Steve. Get me the underwriters at Goldman. Tell them I have a chemical play that's going to make their year. Then get me the direct line for Koch Industries in Wichita. And find out if the CEO of BP is still in London. We've got a mountain to move before the ball drops in Times Square." He looked back at me and nodded.

"You're a madman, John. But you're a madman with a very specific calendar. I'll get you past June. Just make sure whatever happens on January 1st is worth the heart attack you're giving me."

"It'll be worth it," I told him.

"I'm not just selling assets, Martin. I'm buying time. Everything takes time, but I'm a master at timing."