Barbarians at the Gate

by Bryan Burrough

  Johnson, sensing Wilson’s hunger for the deal, drove tough bargains on side issues. Despite Sticht’s love of corporate jets, Reynolds’s perks trailed those of Nabisco. Most everything was negotiable, Johnson said, but not the perks. Wilson thought company apartments for all the top officers of a cookie-and-cracker company was ridiculous. But he wasn’t giving up his dream over Johnson’s petty concerns; he gave in. Johnson insisted he be named president and chief operating officer, number two behind Wilson. He characterized it as a signal to Nabisco people that they wouldn’t be forgotten; Wilson gave in to that, too.

  The problem, of course, was that by elevating Johnson he would be forced to demote the proud, tempestuous Horrigan. Wilson broke the news to him gently, promising to give him a sweet contract, the post of vice chairman, and a place in a new, three-man office of the chairman. Horrigan, seeing he had no choice, relented, taking solace in the fact he would be part of a troika ruling a vast new empire.

  On the last day of May 1985, the Reynolds board met in a teleconference to wrap up the details. Horrigan, en route to Australia to inspect Reynolds troops there, stopped by Del Monte’s San Francisco offices to listen in. Wilson, in New York for the negotiations, ticked off the final terms item by item, leaving the management structure for last. “Ross Johnson will become the president and chief operating officer,” he said. “Ed has agreed to accept the position of vice chairman.”

  “I want to hear from Ed on this,” John Hanley of Monsanto asked. “Is that acceptable to you?”

  Horrigan made a gracious little speech—wholly out of character, some thought—that he had written for the occasion. For several minutes he rhapsodized about the need to sacrifice his ambitions for the greater good. Afterward Wilson came back on the line. There would be an “office of the chairman,” he announced, consisting of Wilson and Johnson. He didn’t mention Horrigan.

  In San Francisco, Horrigan was dumbstruck. Wilson had waited until the conclusion of his self-effacing speech, then stolen the one sop Horrigan felt he had been thrown in the entire deal. Horrigan listened in a fog of rage as the directors finished the meeting. “Ty,” he said, “when this call is over, I want you to call me.”

  “Very well, Ed,” Wilson said in his clipped manner.

  For a minute, Horrigan sat alone. He began to cry, his fury and frustration producing tears that were streaming down his cheeks in torrents when Wilson finally called.

  “I don’t believe what you just said in that goddamned call,” Horrigan stormed. “We had an agreement that I was in that office.” He raged on about how he had a good mind to resign; how dishonest a son-of-a-bitch Wilson was; how he had been played for a patsy in front of the whole board.

  “Now calm down, Ed, calm down.”

  “I am not going to calm down,” Horrigan shouted. “Unless you change this and put me in that office of the chairman, I will recant everything I just said to the board. I will blow this whole thing out of the water. I’m not budging from this phone until you call back and get our deal back.”

  Wilson called Johnson and told him it would be necessary to include Horrigan in the office of the chairman. Johnson, wholly ignorant of Wilson’s deception and of Reynolds politics in general, readily agreed. Wilson relayed the message to Horrigan, singing praises of Johnson’s willingness to compromise. But Horrigan held Johnson equally accountable for the slight; he knew all about how Johnson had seized power at Standard Brands and Nabisco. Horrigan figured Johnson was angling to purge him even before the merger was completed. “Ty, I wish you a lot of luck,” Horrigan said. “Ross Johnson will have your job in eighteen months. Just remember that.”

  “The hell he will,” Wilson retorted. “We made a deal. He’ll get the job when I retire.”

  “Deal, hell,” Horrigan snorted.

  When the merger was completed several days later, a delighted Wilson was in Washington for a Ford Theater gala, where he ran into Johnson’s good friend, Jim Robinson of American Express. Robinson was Atlanta born and bred, occasionally summered at his mother’s home in Roaring Gap, and knew both Nabisco and Reynolds well; Johnson, in fact, had consulted Robinson at length during the merger negotiations. “You’ll like Rawss,” Robinson said in his soft Southern accent. “He’s a good guy, and I know you’ll get along well together.”

  For the most part, the first weeks following the merger went smoothly, though there were undercurrents of uneasiness that would resurface. Because Reynolds had acquired Nabisco, news of the merger was greeted favorably in Winston-Salem, where the locals took pride in gaining control of a great Northern company. The lone dissenting voice was Horrigan, who settled into a black Irish funk. Horrigan groused constantly to Wilson about the Nabisco executives’ perks, about how Laurie Johnson was always traveling with Ross, when that was forbidden by company policy. “Ross Johnson is a snake, a low-life slime,” he declared to anyone who would listen. “We’ll rue the day we hooked up with that character.” When Ty and Pat Wilson gave a brunch to welcome the Johnsons to Winston-Salem, Ed and Betty Horrigan were conspicuous in their absence.

  Johnson was soon down on Horrigan, too, although he was incapable of hating as Horrigan did. “There’s no way I will ever have Ed Horrigan reporting to me,” he told friends. “I don’t like him and I don’t trust him.” Sometimes Johnson mused about whether Horrigan was on the take from the liquor distributors who did business with Heublein, a unit that reported to Horrigan. The more Johnson learned about Horrigan, the less use he had for him. “Ed’s a dead man when I’m running this company,” Johnson vowed.

  Apart from Horrigan, Johnson was initially well received at Reynolds. Alone among senior Nabisco executives, Johnson moved to Winston-Salem, where he bought a large house off an Old Town fairway. He was reported to be a thoroughly winning fellow, a smiling, backslapping yin to Wilson’s tight Prussian yang. “I know what they said about this guy, but I don’t find it to be true at all,” gushed Rodney Austin. “I think he’s great.” In his first weeks in Winston-Salem Johnson made an all-out effort to fit in, driving around in a Jeep Wagoneer, inviting people over to dinner, and joining the board of the North Carolina Zoological Society. Most in Winston-Salem were impressed, but not all. Ginny Dowdle, the wife of Reynolds treasurer John Dowdle, sized up Johnson with a single phrase: “A used-car salesman.”

  Below the top ranks, deep differences in the two organizations were soon apparent. When Reginald Starr, head of the Reynolds shareholder services department, flew to New Jersey for a first meeting with his Nabisco counterparts, he was met at its Morristown hangar by a pair of white limousines with smoked windows. “I don’t know, it looked like Mafia to me,” Starr, a thirty-year Reynolds veteran, said. “It was so ostentatious. I was ashamed to be seen in one of those things…”

  Wilson’s first meeting at Nabisco went no better. As he stepped off a Reynolds jet into the Morristown terminal, he was smoking a cigarette. “Hey! No smoking in here,” barked Nabisco’s flight operations chief, Linda Galvin. Startled, Wilson dropped the cigarette to the floor and crushed it out. If that weren’t enough, the Reynolds contingent found the Nabisco people patronizing. On the return flight Nancy Holder, Reynolds’s meetings planner, took Wilson aside. “Ty, be careful,” she said. “Standard Brands merged with Nabisco, and now there’s no Nabisco left.” Paul Bott, a top planner, scoffed: “Nancy, don’t be silly. Ty’s too smart for that.”

  Even the two companies’ products were an uneasy—some said unnatural—mix. Early on, Horrigan learned that one of Nabisco’s brands, Fleischmann’s Margarine, had developed a joint marketing campaign with the American Heart Association that, among other things, urged consumers not to smoke. Horrigan hit the roof; the campaign was soon dropped. Johnson, of course, made light of combining wholesome Nabisco and the “Death Merchants” at Reynolds. “Mom and apple pie meet the skull and crossbones,” he chuckled. But to Nabisco’s Old Guard, it was no laughing matter. If the stolid Nabisco bakers had derided Standard Brands’s liquor managers as
“the booze boys,” they were even more horrified at joining a tobacco company. In Washington, RJR Nabisco created two political action committees, one for Reynolds, one for Nabisco. Nabisco employees didn’t want their contributions going to the tobacco lobby.

  Johnson, who for the most part enjoyed wonderful relations with the Nabisco and Standard Brands boards, immediately sensed the tensions between Wilson and the Reynolds directors. After the first meeting of the combined board, he got a strong impression of cliquishness and peevishness. Off to one side, Sticht, Macomber, Jordan, and Kreps huddled to discuss something secretively. Out of earshot, Wilson complained about the directors and some imagined slight. “[Wilson] didn’t like them and they didn’t like him,” recalled Johnson. “It was clear there was a lot of scar tissue there.”

  Five Nabisco directors, including Andy Sage, were named to RJR Nabisco’s twenty-person board. One, Charles Hugel, the amiable chief of Connecticut-based Combustion Engineering, lunched with Wilson shortly after coming aboard, and was stunned to hear him openly criticize other directors. Wilson railed at each in detail as Hugel stared in wonder. Why is he telling me this? Hugel thought. How did he expect to win me over by telling me how his board was a bunch of jerks? What kind of instincts does this guy have, anyway?

  As far as the actual business was concerned, the theory behind the merger was that by combining Reynolds’s huge line of products with Nabisco’s, the new company could command greater sway with buyers, demanding more and better shelf space in supermarkets and deeper discounts from wholesalers. Wilson was certain that, by following his beloved process and procedure, success was inevitable. He set up task forces to study joint marketing arrangements, cross-fertilization of management, and other ways to exploit what must be tremendous potential. If it was Sticht’s aspiration to walk with kings, it was Wilson’s to be the hero of a Harvard Business School case study.

  Johnson’s Merry Men, of course, thought Wilson was nuts. To a man they remained at Nabisco in New York, where they found themselves powerless to fight bosses in far-off Winston-Salem. Under Wilson, any strategic move, from advertising to changing a cookie box, required multiple sign-offs and weeks of waiting. The Nabisco people could believe neither the size of Wilson’s staff nor the obtuseness of its exercises. One task force studied how to assemble a telecommunications and computer system that would tie together the whole empire. To Wilson it was a grand-scale means of achieving efficiencies. To Nabisco it was a nightmare. Said John Gora, a Nabisco candy division executive: “It was like we’d been bought by the federal government.”

  Isolated from Johnson, many of his longtime aides grew restless. After just six months under Wilson’s regime, several were poised to leave. Ed Robinson, Nabisco’s chief financial officer, was on the verge of taking a high-level post at A&P, the grocery chain. Peter Rogers had made up his mind to resign as well, and Andy Barrett, Nabisco’s personnel chief, was headed for a job in his native England. Bob Carbonell was complaining about how “you had to raise your hand to go to the bathroom.” Martin Emmett had left before the merger, although he remained on the payroll as chairman of Nabisco Canada.

  Johnson traveled to New York and urged his friends to be patient. Things would change, he assured them. But he knew it wouldn’t be easy to hold them much longer; they hardly bothered to hide their alienation and sense of a separate identity. At the Dinah Shore Golf Tournament following the merger, a retired Del Monte executive was introduced to Ed Robinson and tried to make pleasant conversation.

  “Are you from the RJR side of the company or the Nabisco?” the man asked.

  “Neither,” Robinson replied. “Standard Brands.”

  As the Merry Men’s sense of despondency grew, Johnson directed his p.r. man, Mike Masterpool, to stage a banquet to commemorate the tenth anniversary of Henry Weigl’s overthrow. Held in May 1986 at the Brook Club in New York, it brought together a dozen of Johnson’s coconspirators as well as their board supporters from that fateful day in 1976. The Merry Men took turns reading the board minutes, to great cheers; rose to tell Weigl stories, to great laughter; and, of course, drank mightily. Johnson capped the evening by handing everyone a paperweight inscribed with the numerals “10-5-1.” The meaning: ten years since the Standard Brands overthrow, five years since the Nabisco merger, one year since the Reynolds merger. The upshot: This subjugation, too, would pass.

  Johnson, meanwhile, was doing his best to ingratiate himself with Tylee Wilson. It wasn’t easy; the two men were complete opposites, and Wilson, unlike Bob Schaeberle, was no pushover. Wilson asked each senior executive to submit his daily schedule for the next three months; Wilson himself was personally scheduled to the minute for the next quarter. Johnson’s schedule, if it could be called that, was subject to change by the minute. On the spur of the moment, he might leave Winston-Salem in late afternoon and fly to New York for dinner. Wilson preferred to unwind with solitary weekends on his boat. Johnson liked rounding up an entourage of his celebrity friends for an all-weekend party, inviting a grocery executive or two along so he could write the whole shinding off. Wilson cringed at Johnson’s expense account. When he got a tab for a $13,000 weekend at a Colorado country club, he asked Johnson whether all the hoopla was really necessary. Johnson could always spin a superb rationale about how piddling the cost was compared to the goodwill his party had engendered with grocery executives. “A few million dollars,” he quipped, “are lost in the sands of time.”

  For his part, Wilson worried that Johnson had the style of one of those television pitchmen shouting, “We will not be undersold!” He was forever coming up with new ideas, independent of Wilson’s beloved channels. Some were intriguing, although Johnson would likely have moved on to a whole different notion by the next day.

  At least one of Johnson’s ideas Wilson found disquieting. Soon after the merger had been completed, a spate of new lawsuits were filed against tobacco companies, charging they had caused smokers’ deaths. Reynolds’s stock, which had been marching steadily upward, fell more than ten points into the mid-twenties. Johnson came bursting into Wilson’s office. “You know, Ty, we really ought to be thinking about doing an LBO.”

  Wilson eyed Johnson coldly; he knew all about leveraged buyouts and didn’t like them a bit. “Ross,” he said, “I don’t think much of that idea.” Wilson gave Johnson a lecture on how the industry would win those suits, how the tobacco stocks would recover. “I know this is a frustrating time,” he said, “but it’s only a temporary setback.”

  For all their differences in style, Wilson and Johnson rarely disagreed on business matters, and Wilson came to appreciate Johnson’s quick mind. Johnson was especially useful to his boss in handling the planned consolidation of Nabisco and Del Monte. Johnson also made points by firing Sammy Gordon, the banana trader close to Paul Sticht. After most major mergers some businesses must be sold; Johnson and Wilson easily agreed which ones. Canada Dry was one; Del Monte frozen foods another. Johnson did his usual masterful job of selling them.

  Wilson, in fact, was so pleased with Johnson that he encouraged him to get to know the board members. Sticht, who initially tagged Johnson as a slippery character, shared a transatlantic plane flight with him and later told a luncheon companion, “You know, he’s not a bad sort.” Other directors were even more taken. Much as it had with Henry Weigl a decade before, Johnson’s easy charm contrasted sharply with the prickliness of his boss. Wilson plowed through a five-point discourse on why Canada Dry didn’t fit into the strategic plan and therefore must be divested. Johnson simply told directors, “You could walk on water with that business, and holy hell! There’s the boys from Coke and Pepsi waiting for you on the other side.”

  Behind his back Johnson made fun of Wilson, whom he called “Jigger-balls.” Nobody knew what that meant exactly, but it clearly didn’t fall into the category of affectionate nicknames. On trips to New York, Johnson spun great tales of Wilson and the faltering tobacco business for his despondent chums. “Why, if you listened
to our guys, you’d think we were kicking the shit out of Philip Morris,” Johnson told them. “It reminds me of the boxer who’s getting beat up something awful and going back to his corner at the end of the round saying, ‘He never laid a glove on me.’ The trainer says, ‘Well, keep an eye on the referee, because somebody’s kicking the shit out of you.’”

  After eight months in Winston-Salem, Johnson was dying for a dose of the old glitz, and he arranged to get a double shot that March in Palm Springs. For the Reynolds executives and directors, their first Dinah Shore was a mindblower. Attendees gained admission to events by flashing the $1,500 Gucci watch each was given. That year’s “Night with Dinah” gala featured Frank Sinatra crooning, Bob Hope joking, and Don Meredith emceeing. “That’s an awful leak you’ve got out there,” cracked Meredith, referring to the fountain out front. “But don’t worry; Ross will throw enough money at it to fix it.” Albert Butler, the Winston-Salem patrician, found himself paired with golf star Pat Bradley and baseball legend Johnny Bench and prayed he wouldn’t shank the ball in the crowd à la former president Gerald Ford, who was also playing.

  The Reynolds crowd had never seen anything like it. Over the years the company had sponsored sporting events, but it leaned toward stock-car racing. The weeklong orgy of golf and glamour concluded with more gifts—Nabisco golf shoes and tennis shirts, Polaroid cameras, and compact disc players—all that each invitee’s complimentary suitcase could carry. “We were all flabbergasted,” recalled Butler. It was at the Dinah Shore that the strained relationship between Wilson and Sticht finally fell apart when Sticht was unable to land a seat on an RJR jet home. He blamed Wilson. Sticht was still simmering three months later when, on a morning drive into his downtown Winston-Salem office, he noticed a new building going up near the Whitaker Park cigarette plant. “What’s that?” Sticht asked his driver, Eddie.