The conglomerate’s international food operations were spread over 31 countries and had 64 operating companies. Despite its size, top management had never put an integrated structure in place. TLC sensed opportunity. Since each company was an autonomous unit, it would be easy to finance the acquisition by selling separate pieces of the organization. “We developed the best strategy for acquiring a firm with all of its operating income outside the United States, with financing from the world’s most efficient capital markets, which were in the United States,†says Christophe. “One needed to do that in order to maximize the interest deductibility from a taxation standpoint. We figured that out better than anyone else.â€
Of course, they would need financing for this novel strategy. At the time, the No. 1 guy on Wall Street was the legendary Michael Milken. By 1987, he had turned his investment banking firm, Drexel Burnham Lambert, into a Wall Street powerhouse by, among other things, financing leveraged buyouts. Milken and Lewis had known each other for years. From the outset of their relationship, Lewis had expressed his desire to do business together. Milken stressed, however, that first Lewis had to build a track record. With the McCall deal done, Lewis was ready.
“Reg was talented, insightful, with great attention to detail and great vision,†says Milken. “We had financed the leveraged buyout of Beatrice when it was bought by [private equity firm] Kohlberg Kravis and Roberts, and when the decision was made to sell the international operations, Reg, in my opinion, had put together the best offer, and I made sure he had a chance.†In fact, KKR wasn’t going to let TLC in the auction because, in their view, Lewis lacked credibility. Milken famously replied, “He’s got credibility with me.â€
TLC competed against heavyweights such as Citibank, Pillsbury, and Shearson Lehman Bros.–and won. By August, the agreement was announced: TLC Group was buying Beatrice’s international food division for $985 million. But the work had just begun.
Using the strategy of financing the purchase through the divestiture of its parts, they identified the core European companies as the ones they wanted to keep. TLC Group then hawked other units such as its Canadian and Australian assets. At one point, there were so many deals that TLC transactions were the focus on five floors of Lewis’s old law firm, Paul, Weiss.
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