His analysis revealed a company with a cash flow of $18 million and the sale as an opportunity to buy it at a discount to its intrinsic value. He also found an experienced, knowledgeable management team that he persuaded to stay with the company by giving them an equity stake. In the end, his newly formed TLC Group–a holding company under which Lewis would construct his deals–acquired McCall with $22.5 million financing including $1 million in cash. That included capital from his old client, Equico Capital Corp., and $19 million in debt from Bankers Trust.
After a disappointing first year in which McCall was engaged in a price war with its competitors, the company went on to have its two most profitable years in its 113-year history. By 1985, Lewis was running a holding company that generated revenues of $60 million, earning the No. 8 position on the 1986 be top 100.
These results would have satisfied most entrepreneurs. Not Lewis. “He was looking to sell the company as soon as possible,†says Tom Lamia, a lawyer involved with the transaction. “He wanted to realize gains and free up his capital to do other deals.†In 1987, the TLC Group sold McCall to a British company for about $65 million, plus an agreement to transfer all the outstanding debt. In total, taking into account prior distributions and a recapitalization that occurred before the sale, Lewis achieved a 90-to-1 return on the initial equity investment.
The deal gave him capital, credibility, and clout. With the McCall divestiture completed, Lewis shifted his focus to a new target: the international foods division of sprawling Beatrice Foods.
The Big One: Beatrice
It was the summer of 1987, and Christophe, who had left Citibank, was in his first week at TLC Group. Operating in his temporary office in the mailroom and seated at a card table, he was greeted by Lewis with papers in hand. It was a photocopy of the divestiture memorandum on Beatrice. Lewis had ambitious ideas about the company, and asked his old friend to take a look. Christophe stayed up all night, conducting a financial analysis of its operations. In the morning, the two quickly agreed that the division was worth pursuing.
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