Established in 1870, McCall Pattern is one of the nation’s oldest home sewing pattern companies. Its executive offices are located in Manhattan, New York City, while its production facilities are in Manhattan, Kansas. In 1984, the company had 580 employees.
At the time of Lewis’s acquisition, McCall was making approximately 740 patterns for home sewing. Many of the patterns were based on drawings by such well-known designers as Willi Smith, Liz Claiborne, and Laura Ashley. Eighty-seven percent of its revenue came from the United States, with the rest coming in from Puerto Rico, the United Kingdom, Japan, Mexico, Canada, Australia, and other countries.
McCall was then the second-largest company in the home sewing pattern business with 29.7 percent of the market. Its major competitors were Simplicity Patterns with 39.4 percent of the market, Butterick with 19.1 percent of the market and Vogue with 4.7 percent of the market.
The company had revenues of $51.9 million with income of about $6 million.
This was the company that Reginald Lewis took over and by the time he sold McCall three years later in June 1987, Lewis had piloted the company to the two most profitable years in its history. Under him, McCall’s income doubled in 1985 and 1986, years the company earned $12 and $14 million, respectively. And Lewis made himself a very wealthy man in the process. But within two years after he sold the company, he would be the subject of a major lawsuit. All this was still to come, as Lewis assumed the chairman’s office at McCall’s 230 Park Avenue headquarters in February 1984.
As intense and focused as Lewis was prior to buying McCall, he kicked up his intensity level a couple of notches and became even more driven. He acted as if every decision carried life and death ramifications.
Lewis ran McCall with a firm, yet innovative, hand. His style was an amalgam of Wall Street financial savvy, Harvard legal acumen and brassknuckle street toughness from East Baltimore.
“When he realized how people reacted when he turned up the heat a little bit, he used it,” Kevin Wright says. “It was fun for me to watch this African-American intimidate these very senior, established Caucasian businessmen. His entire demeanor just changed and sometimes he was acting and sometimes he wasn’t. He could generate incredible passion, angry passion. He would just tell you in no uncertain terms that your way was fucked up, that this was the way it was going to be done, he’d tell you why it had to be done this way and that’s it. He’d give you a speech, an angry, passionate speech that could go a minute, two minutes, however long he felt he had to talk to get his point across.”
“Reg was a powerful person even before he became rich,” Tom Lamia remembers. “He could be bullying at times, he could be charming at times, and he could be bullying and charming in the same conversation. Reg could intimidate people rather easily. There were many people who wouldn’t have dared to breathe a word of criticism around him. He had a dark side, a brooding side.”
Ultimately though, Lewis was toughest on himself. Whatever his successes, he would invariably ask himself, “Why didn’t I accomplish more?”
At home in his study, Lewis would indulge in a lifelong habit of rating his performance as well as those of his executives. Like a hard-to-please schoolmarm, Lewis would dole out A pluses, A’s, B minuses, C pluses, and so on.
Nor was his personal life exempt from constant assessing and quantifying. He loved to talk about his tennis game and where it was at a given point in time, but Lewis couldn’t resist the impulse to dispassionately analyze the components of his play, be it his net game, serve or return of service. He’d grade himself on his oft-used A to F scale.
Lewis would even rate novels or magazine pieces he was reading. His mind was constantly gauging, seeking ways to fine tune and perfect. It didn’t matter that perfection was usually unattainable—the quest for perfection was its own reward.
Lewis was also constantly writing notes to himself, calculating the bottom line, scribbling out agendas and tasks to be accomplished during the day, a habit that first surfaced at Virginia State. Whenever Lewis would meet with Wright or Clarkson or members of McCall’s management team, he would always take copious notes.
Lewis actually spent little time at McCall’s plush executive offices on the entire 10th floor of 230 Park Avenue in Manhattan. He had a two-office suite created for him there, but his favorite lair was his law firm at 99 Wall Street. He would go to McCall’s offices periodically to make his presence felt, however, and to put the executives on notice that the new owner was watching.
Lewis still tried his hand at practicing law from time to time, but those occasions had grown infrequent enough to become noteworthy.
“Every so often during the McCall days, Reg would expressly remind us that he was the client. I mean, he’d say it in those many words,” remembers Laurie Nelson, one of Lewis & Clarkson’s lawyers. “He’d say, ‘Laurie, right now I am the senior partner of this law firm and I am your client. And when I ask you certain questions, you’re going to report to me as the client first. When I am done listening as the client, I’ll put on my senior partner hat. And then we can analyze the work.’
“Sometimes the demands he would make on people would seem unreasonable. The thing was, the demand was 300 percent of the expected result. So if you took the demand at face value, you’d go nuts. You needed to take the demand to mean, ‘I want the best you can give me, only I want it twice as fast as you’re capable of doing it,’” Nelson says.
Lewis’s demanding attitude may have made him a difficult boss but it also enabled him to raise the level of everyone’s game.
“One of his strongest traits or characteristics was his leadership ability,” says Everett L. Grant, III, whom Lewis hired in 1985 from the Price Waterhouse accounting firm to be a TLC Group vice president. Lewis had the ability to make people “achieve more than they ever thought they could,” Grant says.
Under Lewis’s stewardship, McCall undertook a number of innovations that increased its profitability.
Under Norton Simon, McCall had focused on operating profits and market share. Because of the shrinking market for home sewing patterns, its former owners believed that operating profits and market share were critical to the company’s survival.
However, under the Lewis regime, a new yardstick for measuring operations emerged: cash flow. Because of the highly leveraged nature of the acquisition, McCall had a sizable amount of debt to retire and thus Lewis devoted most of the company’s efforts to conserving and generating cash. That meant many things would be done differently than in the past. For example, whereas bills had always been paid when they came in the door under Norton Simon, Lewis decreed that they would be paid within 30 days, freeing up accounts payable money for an additional month.
Under Lewis, McCall’s assets were always operated with an eye toward generating additional cash. He came up with the idea of using idle presses not grinding out sewing patterns to make greeting cards. As a result, greeting cards became an important profit center for the company and eventually McCall began to export these cards to overseas markets.
Lewis also shelved McCall’s pension plan and instituted a 401k program, freeing up an additional $648,000 in cash that was used to pay down debt.
Not all of Lewis’s McCall innovations were financial in nature. He set out to change the home sewing pattern industry’s less-than-glamorous image by having the company sign up celebrity licenses with, among others, Diahann Carroll, Shari Belafonte-Harper, and Brooke Shields. All three appeared in publicity photos wearing McCall designs.
One day Lewis was in his office at 99 Wall Street when Earle Angstadt called up and asked to see Lewis right away. Lewis rushed to Angstadt’s office to see what earth-shattering crisis was afoot. An executive with McCall for 14 years and 17 years Lewis’s senior, Angstadt tossed two huge bound catalogues on his desk, where they landed with a resounding thud. The catalogues had “Patterns at 89 Cents” stamped on their covers and were from Butterick, one of McCall’s main competitors.
“They’re running a sale,” Angstadt said plaintively. “The last time this happened, we lost a fortune. We’ve got to meet their price.” The logic behind Angstadt’s argument hadn’t quite registered with Lewis.
“Why?” Lewis asked. “Why do we have to meet their price?” Lewis and Angstadt argued heatedly over pricing, with Lewis adamantly opposed to meeting Butterick’s price and Angstadt all for it. Exasperated, Lewis decided to defer to Angstadt’s years of experience in the pattern business.
“Okay,” he said. “I tried to talk you out of it and I don’t think it makes sense. But if you think this is the way to go, this is the first time I’ve been confronted with the issue. We’ll go with your judgment.”
The move to match Butterick’s prices was a disaster. McCall lost $2 million during the course of the promotion. Lewis was livid. He gave McCall’s executives hell and vowed never to compete on price again.
The next time the pattern industry became involved in a price war, Lewis stuck to his guns. “No, we will not go on sale with those discounts,” he said without hesitation. “I want to show these people that we’re not here to basically cannibalize the industry. I’m not going to meet their sales price—we might lose a little money or not make as much, but I’m not going to lose money every time I sell a pattern. The price of a pattern is such a small price, let’s raise prices some more.”
Instead of lowering its prices to meet the competition, McCall followed Lewis’s suggestion and raised its prices. The move led to a double-digit increase in net sales and a small drop in market share. Lewis was more than willing to accept the tradeoff.
But then, I think the magic started to happen when I sold the organization on some key principles: The name of the game was to hold market share, not increase it at any expense. It was equally important to hold an increased price and moderate the level of increases, and to hold the line on expenses. The earnings started to pop.
Lewis’s decision not to compete on the basis of price and to forsake market share for profit were key moves in increasing McCall’s profitability. And the impetus came not from the company’s seasoned executives but from his own instincts. It was a lesson he would always remember.
When his competitors weren’t sniping away from a pricing standpoint, they were trying to spirit away McCall personnel. In a period of five weeks, Simplicity lured away the McCall vice president in charge of design, the executive to whom the design chief reported, and then the VP in charge of promotions. Lewis didn’t take kindly to the defections.
“He had a fit,” Earle Angstadt says. “We said, ‘Settle down, they’ll be replaced by better people,’ and they were within a period of about two and a half weeks.”
It was a good overall organization. And I had high hopes. We had a crisis early on when we suffered some losses as a result of a price action. It was very clear to me that this was not something that we should do, that is, reduce our prices. But things chugged along. We had four or five vice presidents walk out. Bob Hermann, I remember, went out and found replacements. He called me and said, “Reg, you know we’re going to have to pay a little bit more to get these people, but I think this is what we should do.” And I just said one word, “Go! Pay what you have to, shore up this organization. Make sure its tight.” What’s interesting is, they always appreciated that from me. That was one of the few times I dealt directly with Bob rather than Earle, but to Earle’s credit, he said, “This is so important, deal with Reg directly on this.”
The chairman of McCall looked on with satisfaction as Bob Hermann filled two of the vacancies by stealing talented executives from Simplicity. Lewis briefly examined something that would bring the raiding to a close once and for all—he seriously considered acquiring Simplicity, the No. 1 company in the home sewing pattern industry. However, Lewis was advised that the Justice Department’s antitrust experts would have a field day with any merger between the No. 1 and No. 2 businesses in a four-company industry, so talks with Simplicity were never initiated.
However, merger discussions did take place with Butterick and Vogue, which were both owned by American Can. With the market for home-sewing patterns steadily contracting, it made sense to try and eliminate some of the players from the field. However, Butterick and Vogue got cold feet and the talks never went anywhere.
Lewis had an uneasy relationship with many of his managers. One particular thorn in his side was Bob Hermann, McCall’s number two manager. A six-year veteran of McCall’s sewing pattern wars, Hermann crossed swords with Lewis regularly. They would go after each other during management committee meetings, arguing over such matters as product pricing and how aggressively McCall should go after customers. Hermann took the classic point of view that pricing promotions were a legitimate tool to increase market share while Lewis would argue that market share shouldn’t supersede cash flow concerns.
“Plus, Bob, you really don’t understand the economics of what’s going on here, so this is the way it should be done,” Lewis would tell him.
Lewis was “always there, trying to tell these managers what they needed to do to get this business running right,” Charles Clarkson says. A veteran of McCall with a retailing background and today the company’s president, Hermann didn’t cotton to some upstart lawyer-financier telling him how the pattern business should be run, even if Lewis did own the corporation.
Lewis and Hermann would later face off in the lawsuit involving McCall. Ten years after Lewis’s 1984 purchase of McCall, Hermann’s only remark about Lewis for the record is “No comment.”
Lewis viewed Hermann, Angstadt, and all of McCall’s executives as critical to his plans, but there was always a certain tension in the relationship. Lewis and his managers essentially had different mindsets, with the managers focusing on running the company while Lewis was looking at the big picture and at maximizing shareholder return.
“He saw them as somebody you sort of had to have in order to get the thing operating. I mean, they were operating people and you had to have them, because he couldn’t operate the company himself. But there was always a tension between him and the operating people,” Clarkson says.
However, Lewis always respected Earle Angstadt, McCall’s CEO. Later, when he was running Beatrice International, Lewis actually explored the idea of Angstadt’s coming out of retirement to run the company. “I would be much further along if I had an Earle Angstadt,” Lewis would say time and again.
He paid his operating executives generously, using money as an incentive to spur on his team. He would rigorously review the financial plan for the coming year, then peg bonuses to that plan.
“At the beginning of every year, management said, ‘The plan’s too aggressive, we’re not going to be able to meet it, etc., etc.’” Everett Grant remembers. “Then, they’d meet it and they’d far exceed it.” Under Lewis, McCall’s executives earned maximum bonuses, something they hadn’t received for a number of years before he bought McCall.
While Lewis was generally always on guard when interacting with the operating people, he would sometimes allow himself to relax a little. “He was fun to be with when business was set aside,” Earle Angstadt says. “He and I spent a lot of hours on airplanes together. We enjoyed each other’s company and we shared many confidences at 40,000 feet. I found him a very companionable, very pleasant individual. Reg and I didn’t tell jokes to each other, but we had a good time.”
There is no question that Lewis worked hard, but he also expected to be paid top dollar for his efforts. Lewis received various management and sponsor’s fees as his salary for running McCall, a common practice followed by financiers in the 1980s.
“Reg played close to the line, no question about it,” Tom Lamia says. “But he wouldn’t do it recklessly. He’d get the best advice he could. Somebody unsophisticated might say, ‘My god, you can’t make money that easily unless you’re stealing it, right?’ Well, it all depends on how clever the plan is.”
“Is it easy money if it takes an ingenious tax-planning stratagem to pull it off? Or a very high risk financial or tax strategy to pull it off? Some people would say that’s easy money,” Lamia adds.
“McCall was a means to an end for Reg,” says Earle Angstadt, president and CEO of McCall under Lewis. “He didn’t give a damn about the pattern business. He wanted to use it for one purpose and one purpose only, which was to make a lot of money quickly. He always couched it in terms of shareholder interest—well, about 86 percent of the shareholder interest was in his pocket. It became obvious fairly quickly. I’m not saying that’s wrong as long as it didn’t destroy people and didn’t destroy the fabric of the company.”
It should be noted that Angstadt himself, together with Bob Hermann, were among the shareholders enriched by Lewis. After the sale of the company in 1987, Angstadt retired from McCall a rich man.
Lewis wanted a more permanent capital structure for McCall and had talked to a number of investment bankers about how to achieve that objective. Doing so would allow McCall to pay down some of its debt.
Lewis was told that to access public debt and public equity markets, McCall would have to have more than $5 million in equity on its balance sheet. So, Lewis began to explore various ways to raise equity above $5 million.
Selling the Manhattan, Kansas, facility to a third party, then leasing it would put millions on McCall’s balance sheet. The problem was that a sale would lead to a significant capital gains tax, plus McCall would be subject to the whims of another entity. Lewis conceived of the idea of a sale-leaseback with himself as the other party. Why not sell the McCall plant to Reginald Lewis, then lease it back to the company? That’s exactly what Lewis did on June 18, 1985.
The McCall plant was sold to newly created McCall Pattern Holdings for $2,426,000, the book value of the facility at the time of the transaction, which was slightly less than the orderly liquidation value. Lewis then had McCall lease the plant back from McCall Pattern Holdings under a 10-year lease, and had McCall issue $3 million in preferred stock to McCall Pattern Holdings, in return for the assumption by McCall Pattern Holdings of $5 million worth of debt that had belonged to McCall.
Finally, Lewis had McCall Pattern Holdings borrow an additional $1 million from Bankers Trust and pay $426,000 in cash to McCall. The result of all this financial engineering was that McCall’s balance sheet was improved by $5.5 million. In addition, Lewis came away with a decade-long lease that paid him $1,152,000 a year along with an obligaton to repay a loan of $6 million to Bankers Trust. The sale-leaseback arrangement benefited both McCall and Lewis, but it would eventually come back to haunt him, playing an important part in a lawsuit against Lewis by the subsequent owners of McCall.
In 1985, however, Lewis could only see positives flowing from the sale-leaseback arrangement. “The main benefit to Reg accrued to him through his then about 82 percent ownership of McCall,” Grant says. “Ultimately he did get to realize a significant appreciation on equity. The sale-leaseback strengthened McCall’s balance sheet by removing $5.5 million of debt and increasing the amount of equity on its books through the preferred stock. It left the company stronger economically and this in turn enabled it to do the debt offering.”
Lewis was only getting warmed up. Next on his agenda was a public bond offering for McCall. That would enable McCall to pay off the debt it owed Bankers Trust and then have enough left over to fund future acquisitions.
Lewis had another objective in mind, too: He wanted public markets to become familiar with the TLC name and with paper issued by TLC. To build the business empire that Lewis aspired to, having the ability to raise capital in the public markets was critical, because they’re the most efficient way to raise capital.
The more he thought about it, the more enthusiastic Lewis became about a McCall bond offering. His first choice for an investment bank for the offering was Drexel, Burnham, Lambert.
Drexel said it could pull off an offering with no problem, but wasn’t enthusiastic about raising more money than necessary to pay off McCall’s Bankers Trust debt.
Drexel’s marketing representative Jean Wong had stayed in touch with Lewis after the McCall acquisition. Wong pressed Lewis to attend Drexel’s yearly bond conference in Beverly Hills, an event still relatively new and unhearlded. A couple of years later, the conference would become famous as the “Predators Ball” and an invitation to it would become as prized as a ticket to the Oscars. At this time though, Lewis was skeptical about its merits.
Jean Wong had nagged me to death to come out to L.A. to the Drexel Bond Conference, and of course at that time I did not realize that this was not the typical business conference. So Jean finally said, “Reg, Mike Milken asked me personally to please extend an invitation for you to come because we want this to be the premier conference between institutional investors and dealmakers like yourself. We regard you as one of the outstanding dealmakers in America today.”
I guess this was enough for my ego, so I said, “Well, you never know. Why not?” And indeed, I like L.A. very much. I’ve been going there probably four times a year for the last 10 years, so I went out. I never regretted it. I remember vividly the first meeting with Milken. I had been meeting with Jean Wong, Bob Davidow, Bruce Brown, and a group of Drexel research people as I described the McCall transaction.
I noted earlier how I offered the deal to Drexel but Ackerman was really a little bit of an amateur because he didn’t realize how experienced a deal person I was and gave me the ABCs of deal-making when I was already way past that. So as a result he didn’t get the deal, and in fact he told people the deal would never get done. And of course it got done. Without Drexel. And more important, without Peter having any piece of it, which I’m sure killed him.
In any case, I’m sitting in this conference room and I’m going pretty good and all of a sudden, Milken walked in, moved to the head of the table and started listening. He’s not an imposing person to look at. And what’s funny is, until you get used to it, he has kind of a funny voice. Just a little squeaky and without a lot of resonance. But he is a great speaker and an unbelievable salesman. And I think not having a “Jesse Jackson-type” voice makes it better for him because he’s always talking substance, so you end up listening to the substance. And he has a wonderful ability to take financial facts and weave them into a social scenario. He’s probably one of the most effective speakers I’ve ever heard.
One funny thing was, I didn’t realize that he had a toupee until somebody told me. First of all, I don’t really get off on people’s physical attributes. I take a lot of teasing because of my deep-set eyes. People always note that, or the space in my teeth or whatever. So I guess over the years I’ve always tried to look past people’s physical characteristics.
I think the power of Michael’s intellect surpasses any particular physical attribute. The way he was able to grasp very quickly what I was trying to do, and to give the impression that he understood precisely what I meant when I said that I’m driven by return on equity, and that I like cash flow characteristics and solid management.
Mike asked, “Why didn’t you buy Simplicity?” I said, “I’m not interested in buying Simplicity at this point. Not until I’ve de-leveraged the company.” Buying Simplicity would just buy a higher rate of decline. So the first thing you had to do was de-leverage.
Michael was actually right, except the timing was not good. My philosophy is, first, if you’re using a lot of leverage, bring the capitalization into more normalized means before you start talking about another serious strategic play. In other words, digest a little bit of what you have and confirm your own judgment about the earning power of the assets before you start going off strategically. In any case, I remember I was in such a positive frame of mind that day, when in the middle of my talk, Milken got up and quietly walked out. And I just said to myself, “Well, Reg, I guess you’ve got some work to do.”
Of course there are a million reasons as to why he could have walked out. But that was my first meeting with the great man. This would have been about the spring of 1984.
We wanted Drexel to do a high-yield bond deal that could be used to take out the Bankers Trust Company debt. That would also enable us to buy back the warrants that we gave to Bankers Trust, bringing in some of the equity again and maybe giving us a little bit of excess cash towards some other possibilities. One of the things that was always interesting to me, though, was that people thought the Drexel team was a little reckless, but I was always very impressed with their research. And their due diligence efforts were as good as any other firm that we had dealt with that was very careful in terms of analyzing companies. The point is, they weren’t just wild men willing to do anything. The quality of their research was very good. Bruce Brown and Bob Davidow particularly were always calling on the phone, trying to find out what was going on. I think the way it worked is they would then feed their information back to Milken.
When I think about Milken, I have a vivid impression that he was very insightful. And he has an ability to be really interested in your business and what your company is all about. Something I felt we had in common was a desire to get behind the numbers. There are a lot of people who are very good at understanding the numbers and even extricating financial information from them, but to get behind the dynamic of what is producing the numbers is interesting. In fact, I almost think you’re better off not being a finance person when it comes to doing that. I was glad I never went to business school, because it’s one thing to be able to do a good quantitative analysis, which is important, but it’s better to have a burning desire to get behind the numbers—what is driving this a particular way? And that’s part financial but it’s also understanding a culture of people. Ultimately, you will really generate significantly greater returns if you understand that.
I also appreciate bean counters and the way they understand a business. You need bean counters—I’m a very good bean counter myself. And I certainly have a lot of respect for them. Michael brought a lot of that to bear, along with enormous powers of concentration. So that if you had a half hour meeting with him, for that half hour he was totally and completely focused on your business.
His delivery style was also very good—he had a very good bedside manner. The best way to describe it is that during a lot of meetings with other firms on Wall Street, I could almost feel a banker’s hands sliding toward my pocket. It’s like, “Well, yes, that might be nice for the company,” but he’s primarily concerned about his commission even as I am speaking to him. But I never got that impression with Michael. That’s something else I believe: Do the job and the fee takes care of itself. The two go hand in hand. I am sure some of my good friends on Wall Street will be a little resentful of me saying this—but I think it’s fair. The culture tends to be, “How can we get the biggest fee for the least amount of work?” with the exception of people like B. J. Chubet, who is a dear friend, and Alan Schwartz, and John Sheehy, who spent a lot of time on the deals we worked on. And Michael did not give that impression. But Ackerman did give that impression—I found him a difficult person to do business with.
The next meeting I had with Michael, I took the initiative and called him up. I got Jean Wong and said, “Why don’t I come out and give you a little briefing on our company?” This would have been about the spring of 1985. I flew out the evening before and got in around 11:30, 12 o’clock. The morning of the meeting I was with John Brennan, who was the chief financial officer of McCall at the time. Michael raced into the room, was running a few minutes late, and clearly didn’t like the fact that he was late. He came in, sat down and started going over the deal. I vividly remember him standing up and saying, “Reg, why haven’t you done it? You want to do a debt deal? What’s so big about that? That’s doable. Why haven’t you done these things?”
I loved it. Here finally was a man as impatient as I was, and it was my company! Impatient about seeing progress in a business that was mine. After that meeting, I was sky high. The irony, of course, is that we did do the sale-leaseback without Drexel. And we did the bond deal without Drexel.
In any case, we got the bond deal off. Now, understanding that I’d done it with Bear, I still put Bruce Brown and his guys on the mailing list and sent them all of our public data so they could follow the story. I knew sooner or later I had to do business with Drexel if we were going to be in the marketplace. They were far and away the most dominant player and they were the only guys that I thought would spring for big bucks for the company. By the way, at that point my hot button was $100 million.
I remember sitting with Michael and saying, “Now Michael, this is another lead. Suppose we deliver great results from McCall and I came to you and I say, ‘Mike, here is the situation. I need $100 million. What kind of reception do you think that will get?’” He said, “Reg, do the job and there’s a lot more than a hundred there for you.” This is a true story; he actually said, “There’s a lot more than a hundred.” And I believed him.
It didn’t make much sense to Lewis to raise exactly enough money to pay off Bankers Trust, effectively replacing that debt with an identical one. He wanted an additional $10 million or so that could be used to grow his organization. So Drexel was scratched from the list. Ultimately, Lewis went with the firm that had helped him acquire McCall in the first place, and assigned the bond offering to Bear, Stearns & Co.
Lewis had Charles Clarkson and Kevin Wright handle the myriad issues and tasks associated with a public bond offering. Laurie Nelson and law intern Orlan Johnson were also put to work.
A lengthy prospectus detailing McCall’s business operations and financial picture had to be assembled and filed with the Securities and Exchange Commission. From there, SEC approval would be necessary before Bear, Stearns’ marketing force could use the prospectus to sell McCall bonds to institutions.
As the printing of the bond prospectus got under way, Wright, Nelson, and Johnson stayed at the printers shop from 8 P.M. until 7 A.M., proofreading the document. They were joined by representatives from Bear, Stearns and teams of paralegals, accountants, and professional proofreaders.
The drudgery of having to wait for a prospectus to be printed was offset by the fact that printers tend to pamper those associated with such printings. Grinding out thousands of copies of a multipage prospectus is a lucrative piece of business for printing companies. So an exquisitely prepared Italian buffet dinner was available, and Wright and Nelson finally started digging into it around 11 P.M. As they savored their meal, the last person they wanted to see come striding through the door was Reginald Lewis, so naturally that’s who materialized.
He looked disapprovingly at his famished junior lawyers ravenously feeding their faces and demanded, “What are you guys doing?” Told that Wright and Nelson were eating dinner, an irritated Lewis posed another question, “You do realize that page 42 just came out at the print shop?” The chastened lawyers put down their plates and flitted off in the direction of the print shop.
Once Lewis had gone home for the night, a proofreading check turned up a major error in one of McCall’s financial calculations. It was three o’clock in the morning—who would take on the responsibility of calling Lewis at home, waking him up, and telling him about the error? Since Johnson was only a summer intern, Wright and Nelson nominated him to make the telephone call to Lewis. Johnson slowly dialed the number, expecting to have his head handed to him when Lewis answered. Awakened from a deep sleep, Lewis was grateful to be made aware of the problem. He was instantly coherent and managed to craft a quick solution to the crisis.
The prospectus was eventually approved by the SEC, and Bear, Stearns sold $22 million worth of debentures, which are bonds not secured by specific collateral.
Lewis had walnut memo paper boxes made up for employees who played a key role in the bond offering. Each box had a copy of the cover of the prospectus on it and a brass plate inscribed with “From the $22 million, 7.8 percent subordinated debenture offering of The McCall Pattern Company.”
Proceeds from the bond sale wiped out the debt from the Bankers Trust loan and put an additional $10 million on McCall’s balance sheet.
Before McCall, Lewis was just another attorney, albeit one making a rather comfortable living. But the McCall acquisition had catapulted him into the ranks of the industrial elite. Now that Lewis was the millionaire owner of a large, profitable corporation, some of those around him began to perceive subtle, and not so subtle, changes in his personality.
“He got arrogant, I think, more so,” a former Lewis & Clarkson employee says. “Reg’s ego, it always seemed to me, got bigger and bigger as the years went on, as the successes mounted. Eventually, he felt there was nobody better financially than he. He felt he was the franchise. He actually used those words once—‘I am the franchise.’ He could do no wrong and he knew everything and no one else knew anything.”
Another individual who declined to be named intimates that Lewis would frequently tell those in his inner circle, “‘You don’t know what you’re talking about, you jackass!’ He would say it in front of anybody. ‘Asshole! You dumb son of a bitch!’ That’s why Reg was difficult to deal with. Being screamed at and insulted in front of other people was the worst.”
Kevin Wright observes that after the McCall acquisition, Lewis bumped Charles Clarkson’s compensation to a level that made Wright envious. He too observed a change in Lewis’s demeanor after Lewis became the owner of McCall. “He knew he was at a new station in life and he expected to be treated in accordance with his station,” Wright says. “And yes, there were people who had known him before, but they had to adjust or they had to go. You had to recognize that Reg Lewis was driving this show—he was going to do it his way. If you could accommodate that, fine. If not, ‘Thank you very much for your contribution. I will always be your friend and if you need me, call me.’”
Tom Lamia, who remained Lewis’s attorney on business matters beyond the McCall years before the two of them eventually had a falling out, found he had to make an adjustment to remain in the Lewis camp. “He could be very difficult,” Lamia says of Lewis. “As he got older and more narcissistic than when I first met him, he became—frankly—sometimes hard to take.”
On one occasion during the McCall days, a well-known black trial attorney came to Lewis’s office at 99 Wall Street. The two of them sat in Lewis’s office, shooting the breeze about being African-American males who used the legal system as a stepladder to success. Their conversation turned to the possibility of a joint business venture, then the subject of compensation came up.
“Well, you know Reg, once you’re making a million a year everything else is just gravy,” the swaggering trial lawyer boasted, quite taken with himself. “Well, no, I wouldn’t say that,” Lewis interjected. The pompous attorney was insistent. “Yeah, I know man, but once you got a million a year, come on!” Lewis, whose timing could be impeccable, paused a beat. He looked his compatriot in the eye and without a hint of a smile, uttered two ego-deflating words: “Trust me.”
When it came to McCall, Lewis preserved his habit of fighting for the last nickel. At one point, the company became the target of a nuisance lawsuit seeking $20,000 in damages. Kevin Wright was acting as McCall’s general counsel and he and McCall President Bob Hermann tried to fight the suit at first, then decided it wasn’t worth the trouble. Settlement seemed the prudent path to take, so Wright and Hermann decided to give the plaintiffs $20,000 to disappear. Under their risk/benefit analysis, $20,000 was a minor sum to pay to stave off a potentially costly and time-consuming legal battle.
Afterward, Wright went back to 99 Wall Street to meet with Lewis. Charles Clarkson was in Lewis’s office. “Kevin, anything going on with McCall,” Lewis asked, glancing up briefly from some papers on his desk. “Yeah Reg, Hermann and I decided to settle this claim,” Wright answered. He instantly had Lewis’s undivided attention, because Lewis was loath to part with his hard-earned cash. “Okay, how much did you settle for?” Lewis asked. Wright replied the amount was $20,000. “Okay, how much was the claim?” Lewis wanted to know, starting to zero in. Storm warnings were waving inside Wright’s head as he told Lewis the claim and settlement amount were identical.
“Come on, for Christ’s sake!” Lewis bellowed. “Just to make them respect you, you demand SOMETHING. You don’t just roll over.” Lewis then launched into a full-scale dressing down of Wright when the young lawyer suddenly sprang from his chair, hurled a pencil across the office and stalked toward the door. Wright was on his way out and about to slam the door behind him, when he heard Lewis warn him in a calm voice, “Kevin, don’t slam the door.”
Wright closed the door gently and skulked next door to his office. The rush of anger that had emboldened him a moment earlier was quickly replaced by an acute sense of trepidation. After a few minutes that seemed like hours, Lewis knocked on the door to Wright’s office and came in. “I’m thinking, ‘Oh god, how do I play this now? Do I continue to stand for my rights, or do I capitulate?’” Wright remembers. He began to apologize, but Lewis cut him short.
“Kevin, for me to engender that kind of response in you, I must be doing something wrong,” he said. And with that, Lewis formally apologized to Wright. The incident was quickly forgotten and the two men’s special mentor-protege relationship continued forth undamaged.
If you were a buddy of Reginald Lewis’s back in the days when he was poor, usually you’d made yourself a friend for life. “If he had come from a pompous point of view, that wouldn’t have worked with us because that’s not what keeps a friendship alive,” says Ellis Goodman, who befriended Lewis when the two of them held down minimum-wage jobs in a Baltimore area country club. “He loved sharing his knowledge and having somebody around to enjoy it. I never found him in any way boastful, although he had plenty to be boastful about.”
Lewis was the kind of wealthy relative anyone would love to have. He was generous with his family before he acquired McCall and became even more so afterward. He loved personally selecting gifts of clothes, jewelry, and fur coats for his wife and his mother. He lavished expensive gifts on everyone, particularly at Christmas time when he would load a car full of presents and then motor down Interstate 95 to Baltimore. Whenever he accompanied his relatives on an outing, Lewis would never allow them to pay for anything.
One time, Uncle James and the Internal Revenue Service were having a $75,000 dispute. Lewis insisted on taking care of it, an offer Uncle James gratefully declined. Another time, Lewis asked Uncle James if there was anything he could do for him. Uncle James was quiet a moment, then impishly asked Lewis to give him a million dollars, so Uncle James could enjoy the life of a millionaire, too.
“I ain’t giving you shit,” Lewis deadpanned. “I ain’t giving you no million dollars. Earn it!”
If Lewis was magnanimous and big-hearted with his family, he didn’t like them approaching him with hat in hand, jokingly or otherwise. He gave on his terms and when he felt the time was right.
By the fall of 1986, Lewis had grown fond of the pattern business. He felt that McCall had an infrastructure that compared quite favorably with organizations of much greater size. During the early phases of his McCall stewardship, Lewis’s intention was to hold on to McCall and use it to acquire other companies. He decided that if a target business were related to McCall’s operations, he would use McCall to capture it. If not, then TLC Group would acquire the target.
In the meantime, Lewis continued to search for a bigger acquisition. He was still an avid reader of prospectuses, leafing through them the way others might read a retail catalogue in search of interesting things to buy. He was constantly examining companies and brainstorming about what he could do with their proceeds after he got them. Although Lewis didn’t possess an MBA, unlike many financiers, he had developed an excellent grasp of how to get the most out of a company financially. His understanding of finance was developed by examining transactions and this gave Lewis a utilitarian take on the subject.
By the summer of 1986, thanks in part to Lewis’s efforts, McCall had a strong balance sheet and much improved earnings. Lewis was now ready to lead McCall into another arena. He decided to take the company public, thereby generating cash for his acquisition plans.
Lewis retained Bear, Stearns to handle the initial public offering, which aimed to put 2.2 million shares of the company on the American Stock Exchange. The estimated price range for a share of stock was $11 to $13, meaning that McCall stood to generate anywhere from $24.2 million to $28.6 million.
Two obstacles stood in the path of a successful McCall IPO. First, potential investors would probably be quite leery of a company whose line of business had been shrinking steadily over the last decade. Second, Lewis was also worried about the fact that Bear, Stearns had a backlog of deals to introduce to public equity markets that summer. Bear, Stearns would not get to the McCall offering until August when many investors would be on vacation.
Nevertheless, Lewis and his team embarked on a road show, the Wall Street equivalent of a Broadway road tour. Presentations about the company were held in different cities for the purpose of selling stock to investors. The group which included Lewis, Angstadt, and several Bear, Stearns executives headed first for Europe.
One day Lewis had just completed a meeting in Switzerland that had gone particularly well, leaving him feeling positive and upbeat. He pushed Bear to increase the price for McCall’s stock from the planned $11 to $13 range to $14 a share.
Then Lewis got a phone call from New York that brought his mood crashing back to earth. Alan Schwartz of Bear, Stearns was on the phone and informed Lewis that, in part because of a negative Wall Street Journal article on the IPO market, the market’s bottom had fallen out. The McCall public offering was dead.
Within a few hours, Angstadt and a brooding Lewis were on a plane headed for New York. Alan Schwartz had a lot of explaining to do.
After Lewis arrived in Manhattan, a meeting was arranged with Schwartz. Joining Lewis were the top managers of McCall, Earle Angstadt, Bob Hermann, and chief financial officer Craig Woods. Exactly what was the problem with McCall’s IPO, Lewis demanded to know? Schwartz began to outline the reasons why the McCall IPO would never fly, but that was the last thing Lewis wanted to hear after McCall had paid hundreds of thousands of dollars in advisory fees in order to go public.
When the window of opportunity starts to come down on the IPO market, Schwartz explained, it doesn’t come down slowly. Bang! It just slams shut, and that’s what happened to McCall’s stock offering. A very angry Reginald Lewis listened skeptically. When Schwartz’s explanation was over, Lewis started asking some pointed questions. He didn’t totally buy Schwartz’s view of what was happening and expressed an opinion that McCall’s IPO might have gotten off the ground had Bear, Stearns not spent an inordinate amount of time working on the IPO of a clothing corporation, Leslie Fay. Lewis had a high degree of respect for Schwartz, but he was in no mood to hear Schwartz’s rationalizations.
Schwartz suggested that the IPO might still be able to get off the ground if the price of McCall’s stock was knocked down to $9 or $8 a share, but Lewis would have none of it. It was his price or nothing.
By now, Lewis was beginning to feel it was time to get out of the pattern business. He would like to have continued on as the owner of McCall, but it was becoming clear he wouldn’t be able to access public equity markets. That in turn meant he wouldn’t be able to use McCall as a vehicle for acquiring other companies, which in turn meant it had limited empire-building capability. So Lewis came up with a new plan to capture some return on his and his shareholders’ investment in McCall before the tax laws changed at the end of 1986.
Lewis initiated negotiations with Bankers Trust that would lead to a change in McCall’s financial structure through a recapitalization of the company. Under the plan, Bankers Trust would put a significant amount of money into the company, making it a 40 percent partner going forward, while Lewis and McCall’s shareholders would receive a large cash payout.
The talks with Bankers Trust started toward the end of 1986. The negotiations dragged on almost up to New Year’s day, with Lewis and Bankers Trust paying hefty fees to financial advisers associated with the recap.
Things appeared to be moving along smoothly until December 30, when Bankers Trust came up with a new and startling demand—in order to get the recap done Lewis would have to give Bankers Trust unfettered discretion with respect to the way McCall was to be run. Someone on the Bankers Trust team apparently felt that the fees Lewis had run up and the imminent arrival of unfriendly new tax regulations had placed Lewis in a position where he had to capitulate.
The bank had badly misread Lewis. “Okay, thanks,” he told the bank’s stunned executives who also had amassed considerable expenses up to that point. “I’m not interested,” he said, and walked out.
This was an occasion where Lewis’s penchant for always having a Plan B proved invaluable. He didn’t have much time—one day, in fact—before 1987 and the new tax laws arrived. But he had a plan that might just work.
Lewis first declared a dividend of $3.6 million that was distributed to McCall’s shareholders. Then he began repurchasing McCall subscription warrants—securities giving the holder an option to buy large amounts of common stock—that had been issued to Bankers Trust and Equico Capital Corp. Warrants essentially give a lender a chance to get in on the action if a firm starts to perform well, but at the same time don’t expose a lender to downside risk if the company performs poorly and its stock goes down.
Bankers Trust and Equico were pleased to sell their McCall warrants to TLC Group: Each organization realized a handsome profit based on the increase in McCall’s worth under Lewis and a corresponding bump in the value of the warrants.
Lewis had TLC Group, not McCall, repurchase the warrants for an aggregate price of $3.1 million. Had McCall bought the warrants back, the move would have significantly depleted the cash on McCall’s balance sheet. That would have wiped out the positives accomplished in the sale-leaseback and the bond sale. Plus it would have set back the improvement in McCall’s earnings Lewis had worked so hard to achieve.
Only after he had sheltered McCall’s equity did he have McCall then purchase the warrants from TLC Group for $15.4 million, $12.3 million more than Equico and Bankers Trust had sold them for. The price was based on a valuation of the company of $70 to $90 million by First Boston as well as potential buyers. Lewis then divided the $15.4 million among himself, Earle Angstadt, Bob Hermann, Ricardo Olivarez, and Sam Peabody. Because Lewis owned 100 percent of TLC Group, he didn’t have to share the money with his associates, who owned shares in McCall, not TLC Group. But for Lewis, it was a point of honor to share the profits of his labors with those who supported him when he was trying to buy McCall. Lewis genuinely viewed the other men as his partners, even Hermann. By now, the McCall shareholders had reaped a total of $19 million from the company—the $15.4 million from the warrant repurchase plus the $3.6 million dividend.
The chairman of McCall agreed to purchase the shares of his fellow shareholders, based on a company valuation of $55 million, with the understanding that if he sold the company for more, he would pay them the difference. In addition to rewarding those who had put their faith in him, Lewis had another objective in mind: He wanted the word to get out that if you did business with TLC, you were treated fairly and you got a superb return on your investment.
Buying back the shares from his fellow shareholders brought Lewis’s stake in McCall from 81.7 percent to about 88 percent. Despite his affection for the firm, Lewis realized that the only remaining way to realize a truly significant return on his investment was to sell the pattern company.
“He clearly wanted to cash out,” Kevin Wright says. “If you’re a buyout group, you don’t fall in love with any business. When you’ve made enough, you cash out and let somebody else take the risks inherent with that business. So, toward the end of 1986, Reg was verbalizing that he felt it was time to go home on this one.”
Along the way, we pursued a lot of different alternatives in terms of raising the equity. We did a sale-leaseback transaction. We also paid out our bank debt in less than 18 months. We brought in some equity at a reasonable price, but also gave our investors a tremendous return in an 18-month period. We pursued an acquisition of the Butterick Company. We pursued an acquisition of the Simplicity Company. We tried to take the company public. We talked about a recapitalization with Bankers Trust. None of those things worked—well, the sale-leaseback worked, but some of the other things didn’t work.
I was reading Tom Wolfe’s The Right Stuff at the time and felt almost like a jet pilot: I’ve tried A. I’ve tried B. I’ve tried C. Well damn, maybe I should die like a man or something. In any case, business turned up and by December of 1986, two years after the deal, we had $23 million in cash on our balance sheet. That was about $20 million up from what we had when we acquired the company. And we had increased earnings from $6.5 million of operating to roughly $13 million or $14 million. The rest of fiscal year 1987 looked pretty good, also.
At that point, Earle Angstadt came down to my office and we had kind of an interesting meeting. He said, “Reg, I just may not be able to be with you for the next few years.” He wanted to spend more time with his lovely wife, among other things. I said, “Okay, Earle, then in that case it’s time to go.” From there we did a $19-million recapitalization that resulted in impressive shareholder return in December of 1986.
All these factors pushed Lewis in the direction of a sale. He decided that an auction would be the best way to sell McCall and retained First Boston to handle the auction. He then got together with McCall’s executives to prepare an offering document. It was completed in January 1987, and sent to about 80 prospective buyers.
Lewis was leaving McCall a revitalized company. He had strengthened its balance sheet and led it to the two most profitable years in its history.
“Reg comes in and extracts the highest profit margins they’ve ever had,” notes Howard Mackey, a client from Lewis’s attorney days. “I always wondered how he managed to do that from a law firm at 99 Wall Street. That is some testament to the way he managed things and managed people.”
The auction ended in June 1987 when a British textile manufacturer, the John Crowther Group, bought McCall for $65 million, nearly three times what Lewis paid for the firm three years earlier.
I signed the contract with Trevor Barker of Crowther to sell McCall for $65 million, right on the heels of our recapitalization for $19 million. I sold to the bidder we thought was best for the Company—a publicly-held British concern—at a price of roughly $63 million, plus $2 million for our expenses.
TLC had also managed to keep the real estate, which was easily worth another $6 million to $10 million and we’d also gotten some other dividends, so all in all that was about $90 million on our original investment of $1 million, and it was all in cash. And not only that, we felt that we were leaving the Company in excellent shape because the new buyer was putting up $30 million and had some plans for what he wanted to do with it. I was feeling pretty good.
The name of the game is return on investment. After three and a half years, an investor in a “TLC deal” could surely smile with justifiable satisfaction. The closing was consummated on June 30, 1987. We signed the contract about June 15th. Rather than try to take Crowther up from $65 million, I said, “Okay, close in two weeks.” I traded cash for speed and we got it done very fast.
When Lewis told one of McCall’s directors, Lee Archer, about the price that had been paid for McCall, Archer actually laughed out loud. “What idiot would pay us $65 million for a company when it’s in the record that we only paid $22.5 million,” Archer asked incredulously. Lewis just smiled broadly.
On June 30, 1987, Lewis was seated in a conference room with Earle Angstadt and about 20 other people when the voice of a female vice president at Bankers Trust came over the speaker phone, “The funds have been irrevocably transferred.” Angstadt sprang to his feet, uttered “Good night, gentlemen,” and bid Lewis and McCall adieu. Lewis had made Angstadt a wealthy man.
“As far as his business acumen is concerned, if I had had his financial smarts, I would have taken over the company without him,” Angstadt says. “But I didn’t. I was never a student of the things he mastered.”
An elated Lewis and his closest associates went to the Harvard Club where a party was held in his honor. Just the mention of the name “McCall” was enough to make the jubilant Lewis break into a wide grin, but in a couple of years his sale of the sewing-pattern manufacturer would spawn a litigious nightmare that would keep a perpetual scowl on Lewis’s chiseled face.
Lewis would emerge victorious from the litigation but the experience would not leave him unscarred. He would always look back on McCall and his 90-to-1 gain as his “best work.” Soon this feat would be much publicized—a development that benefited Lewis greatly in the long run.
The financial media have the power to move markets, create fortunes, and make or break careers. Less than a year had passed since the abortive McCall IPO, and Lewis remembered well the cooling effect that a Wall Street Journal article had exerted not just on McCall but on the entire IPO market. Lewis read the financial press avidly and respected its influence, but he was no fan of the media, per se. Prior to acquiring Beatrice, Lewis had been content to operate in relative obscurity because he didn’t need the press to accomplish his objectives, nor did he feel any burning desire to be in the spotlight. And frankly, he wondered about the motives of the Fourth Estate.
Lewis’s wariness of the press became even more pronounced after the sale of McCall. Not long afterward, Lewis was in the study of his home reading newspapers very early one morning. As he was flipping through The New York Times, a piece about the new McCall president and CEO, Bob Hermann, caught Lewis’s eye. The headline read, “McCall Pattern’s Head Pleased by New Owner.” The story opened by saying, “The McCall Pattern Company has been through several leadership changes that were not all good for its business. But being sold to its new owner, a British company called the John Crowther Group, ‘is probably the best thing that ever happened to us,’ said Robert L. Hermann.”
Already Lewis’s trademark furrow was working its way across his brow. Here was Hermann trying to steal his thunder, and doing so in a newspaper distributed around the globe. Lewis didn’t know exactly how, but he intended to steal his thunder back.
This was the same Hermann who, in Lewis’s view, wanted to take McCall down a discount-pricing path that wouldn’t have generated the same spectacular financial results McCall enjoyed under Lewis’s leadership.
But on another level there was something else about the Times article that bothered Lewis: Namely, the history of this country is replete with instances where noteworthy accomplishments by African-Americans have been glossed over, modified, or totally ignored by whites. Lewis was determined not to let Hermann do the same thing to him.
By now Lewis’s rugged features had scrunched into a full-blown scowl. He folded the newspaper with irritation, strode out of his study, and awakened his wife to show her the offending article.
“Goddamn that Hermann,” he exclaimed. “You see? They’re rewriting history already. They’re just going to overlook the fact that McCall prospered under my leadership!” This injustice would have to be rectified immediately. Lewis looked at the story again to locate the reporter’s byline. Finding the offending scribe to be one Daniel F. Cuff, Lewis called directory assistance. There couldn’t be more than one or two Daniel Cuffs in the phone book. Lewis got a number and punched it into his phone.
Members of the press like to perceive themselves as totally objective and free of biases, but ultimately USA Today, The New York Times and ABC News are all comprised of individuals harboring the same kinds of prejudices and pet peeves as anybody else. Not surprisingly, awakening a reporter at 6 A.M. is not a good way to ensure totally fair and objective coverage in the future. Any ill will that might result from calling Daniel Cuff early in the morning was the least of Reginald Lewis’s concerns.
Loida Lewis got involved in her husband’s spin-control project later that day. A Wall Street Journal reporter she knew recommended someone who might be able to assist Reginald Lewis—one Rene S. Meily. Meily, who uses the name “Butch,” was working at his desk at Burson-Marsteller, one of the country’s top public relations agencies, when the phone rang in his Manhattan office. Loida Lewis was on the line, telling Meily that her husband had a public relations problem. She briefly outlined the matter with The New York Times and Daniel Cuff. Could Meily help out?
Meily got to work immediately, arranging a one-on-one interview between Lewis and Cuff, whom he knew. Lewis and Meily were to meet in the lobby of The New York Times that same day, then go upstairs to see Cuff. Meily was already in the lobby when Lewis arrived, wearing a dark, tailored business suit. After a handshake and a brief exchange of pleasantries, Lewis got right down to business. He talked about the upcoming interview and asked if Meily had any advice on how Lewis should handle himself. “Be yourself. You seem to know what’s going on and how to handle yourself,” Meily replied. “Stick with that.”
When they met with Cuff, Lewis was at his most charming. The early morning phone call that day was most unlike Lewis, he assured Cuff. Nor had Lewis meant to unsettle Cuff or offend him in any way. Once finished smoothing Cuff’s feathers, Lewis segued into a masterful capsulization of his ownership of McCall and how the deal had benefited his shareholders so handsomely. The interview with Cuff went well, although Lewis didn’t think so. He said as much to Meily in no uncertain terms after they’d gotten into Lewis’s chauffeur-driven car in front of the Times’ entrance on West 43rd Street. “He was so nervous that he was really going at me in the car. I don’t even remember over what, but I think he was upset over a couple of things,” Meily says. “That was the first time I saw his temper.”
A low-key, mild-mannered man with a knack for understatement, Meily notes that the episode in the car “may have set the tone for our relationship.” Meily would later become the public relations person for TLC Beatrice and was the frequent target of vociferous verbal attacks from Lewis. Other TLC Beatrice executives welcomed Meily’s arrival when an angry Lewis was venting his displeasure over some matter, because Meily would stoically endure the storm until the energy had been spent. “You don’t take the temper stuff too seriously, you handle it well,” Lewis later told Meily. “You’re almost like a lightning rod sometimes for me.”
However, Lewis also recognized that Meily excelled at the business of spin control. A few days after The New York Times interview, Cuff authored an article that described Lewis’s stewardship of McCall in glowing terms. The piece noted that “Mr. Lewis, 44, is an intense lawyer who is likely to call an associate at 6 A.M. to deal with a problem.” The headline for the story was “90-to-1 Return for Investor,” which was the primary message Lewis wanted to get out. Lewis was justifiably proud after that article hit the newsstands. “He was ecstatic,” Meily remembers. “He was quite sensitive to every nuance. He read and reread that article to see how it was slanted and if it was slanted. He was quite sensitive to how he was perceived.”
Lewis was so delighted that he worked out a retainer arrangement with Meily’s employers that made it possible for Meily to do public relations work for Lewis on a regular basis.
The 90-to-1 piece, which also included a picture of Lewis, represented the first time he used the media to do his bidding. There were several occasions when he and his team took copies of the article with them as they met with executives and financiers who could help them purchase and operate Beatrice. While Lewis remained wary of the media, he saw they could be a useful tool if manipulated properly.
About a week after the Times piece, Lewis received a congratulatory letter at 99 Wall Street from one of his high school classmates, William Smith. An Army dentist stationed in New Jersey, Smith wrote in part, “Accomplishments such as yours serve to fuel the aspirations and dreams of your people. Now that the mantle of leadership has once again been thrust upon you, it should be comforting to know that others are elated to have you wear it. Keep on achieving, my Brother.”
Lewis, who was busy plotting his strategy for acquiring Beatrice at the time, took time to respond:
July 27, 1987
Colonel William Smith, Jr.
Headquarters US Army Dental Activity
Mills Dental Clinic
Fort Dix, New Jersey 08640
Dear Smitty:
Thank you very much for your letter. I appreciate very much your comments about the McCall deal. It has been a wonderful transaction for a lot of people, and I would like to share it with the world; however, I continue to believe quite strongly that maintaining a low profile is the best strategy for achieving good results. I say this for a couple of reasons.
First, a critical element, I believe, of success in the investment area is to have a focused point of view—an anchor of beliefs and concepts which, while flexible, is unshakable. Rarely can these concepts and beliefs be communicated accurately through the media. When one reads these articles in the newspapers, they rarely convey the true message, and this tends to both distract from the primary mission and miscommunicate that mission to one’s team. Second, we still live in a world where envy and jealousy are the normal state of affairs.
At the same time, some publicity is inevitable and is worthwhile to the extent it encourages friends like you to convey heartfelt and warm feelings.
Warm personal regards.
Sincerely,
Reginald F. Lewis
Lewis talked frequently to Carolyn Powell—a classmate from Virginia State and also a close friend who happened to live and work in New York—about the media. “Reg did not like to deal with the media, because Reg wanted to be considered a businessman and he didn’t want a lot of fanfare,” she says. “We used to say that if you’re doing it, you don’t have to talk about it. The limelight was not important to him—he wanted to do well. It’s like, ‘I can do this, a black man can do this, and I don’t have to be like some of the black folks that have to shout about it to the rooftops. Let’s just do business.’”
Consequently, TLC Beatrice wasn’t exactly media friendly under Lewis. Requests for information were cordially received, but seldom granted expeditiously, if at all. And interviews with the chairman were exceedingly rare. Lewis granted just a few requests, usually after numerous inquiries. Which is not to say that Lewis didn’t enjoy acclaim and kudos, because he did. Lewis just never blew his own horn in the press, with the exception of “90-to-1.” And that might never have taken place had Lewis not first seen a story that he felt belittled his achievements.