The Gambler

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by William C. Rempel


  Kirk had also become friends with outgoing Chrysler chairman, Lee Iacocca, and his new wife, Darrien. Once Lee was nudged into retirement by the Chrysler board, Kirk put him on the MGM Grand board of directors. In the summer of 1992, they had spent several days together touring the Italian Riviera aboard Kirk’s yacht, the October Rose. Kirk’s personal companion on that cruise was the slim and athletic Lisa Bonder, a onetime Top Ten ranked women’s tennis pro. She would confide to Darrien her secret desire to become the richest woman in the world . . . and Kirk’s wife.5

  Since his separation from Jean in 1982 and eventual divorce, Kirk’s love life had made the occasional gossip column, but it was pretty tame reading. After a second extended relationship with Yvette Mimieux, Kirk was mentioned frequently in the company of Cary Grant’s widow, Barbara.

  Nine months after Cary Grant’s fatal stroke, a Liz Smith column said Barbara Grant “may marry one of Cary’s best friends, Kirk Kerkorian.”6 And the Hollywood Reporter said the couple was shopping for a villa together in the south of France. In fact, they had been living together at Kirk’s Wanda Park compound for some time, where she sometimes complained about Kirk’s tendency to feed his little dog Scoshie from the dinner table.7

  Kirk, then in his seventies, was not interested in marriage. And about the worst thing that could happen to any of his romantic relationships was to have public speculation erupt about wedding bells. It marked the end of more than one Kerkorian liaison—though the friendships tended to continue. Kirk would later be among the welcome guests and friends when Barbara Grant did remarry.

  He was so jealous of his privacy that he came to require his romantic partners to sign nondisclosure agreements, making both his personal life and business interests confidential. Lisa Bonder, twenty-six, about the same age as Kirk’s youngest daughter, reportedly got off to a rocky start over privacy matters.

  They were vacationing on the October Rose along the French Riviera during the run-up to Wimbledon in London. Lisa had left the women’s tennis circuit several months before the birth of her two-year-old son. She was now in the midst of a divorce and contentious child custody dispute.

  “Suzy,” the grande dame of tabloid gossip columnists, broke news about the Kerkorian-Bonder relationship but also reported that Lisa had been testing Kirk’s patience. She was calling her old tennis pals at Wimbledon and bragging about having a wonderful time on the billionaire’s yacht.

  “This has displeased Kirk, to say the least,” wrote the widely syndicated columnist. She went on to tell her readers that Lisa was best remembered for once defeating tennis great Chris Evert “and for having a big mouth.”

  33

  The Iacocca Nuisance

  April 11, 1995

  New York City

  Chrysler chairman Robert Eaton was in town for the annual New York Auto Show where he was scheduled the next morning to introduce the company’s 1996 minivan, almost certain to be the star of this year’s Jacob Javits Convention Center event. As he climbed into his limousine the driver handed him a message.

  “Call Kerkorian immediately.”1

  Nearly five years after investing his first $272 million in the Chrysler Corporation, Kirk had become something of a nuisance to the board and management of the company. Yes, share prices had improved under Kirk’s continuing pressure to increase dividends and to buy back stock. But those stock prices remained low compared to the company’s value.

  Much to Eaton’s delight, Chrysler had been stashing away a billion dollars a quarter in excess cash—rainy day funds, he said. But to Kirk, it was an excess of caution. The billionaire figured he had a better idea and was whispering about one of the most audacious strategies ever floated over Detroit: a buyout that would take the nation’s number three automaker private. Kirk’s people had been talking to Eaton’s people, who thought they had dampened Kerkorian’s enthusiasm. Not at all. Their top secret Project Beta was still very much alive. Kirk’s passive investor phase was ending.

  Eaton returned to the nine-room corporate apartment at Waldorf Towers and waited a couple of hours, much of it spent pacing the floor, before returning Kirk’s call. It was 7:30 p.m. in New York and Eaton was alone when he connected with his single biggest investor.

  “Bob, you know our people have been talking. We’re going to make an offer for the company. We’re coming out at fifty dollars a share,” Kirk rumbled in his soft baritone voice.

  “Do you have financing?” Eaton asked.

  “Yes, we’re going to have a press release on it.” Everything would be explained in the morning announcement Kirk said.

  History did not record the full exchange that evening. In fact, the only two parties to the conversation would provide slightly—but significantly—different versions.

  Kirk hung up and told one of his lawyers, “That went very well with Bob. He is totally on board. They’re not going to endorse it, but it went as well as expected.” He thought Eaton was conveying a passive position on the buyout. It might not be friendly, but it wouldn’t be hostile.

  According to Eaton’s account, however, he told Kirk, “You know, we can’t join you on this.” It was intended to convey the message that the buyout would be vigorously opposed. It didn’t.

  Next morning at the Javits Center there was panic among the Chrysler auto show team. Eaton was missing. He was supposed to present the new minivan, but he wasn’t on site. And he wasn’t at the Waldorf. The company’s $2.6 billion redesigned minivan was going onstage without its presenter. “Where the hell is Eaton?” demanded one frazzled public relations staffer.

  The boss was heading back to Detroit for emergency consultations.

  Word of Kerkorian’s $22.8 billion buyout offer would be announced from the podium a short time later by a senior public relations official reading a press release. Lee Iacocca was identified as a member of the MGM Grand board of directors and a leading investor in the Chrysler buyout. BAM! The conference center erupted in shouts and tumult. Reporters rushed for the pay phones. News flew around the world. On Wall Street, Chrysler shares jumped $13 before settling back in heavy trading.

  At the Javits Center, shocked Chrysler officials were caught completely by surprise, as uninformed and mystified as everyone else. The confusion would take days to sort out.

  At Bear Stearns that morning Ace Greenberg heard the news and immediately grabbed a phone. A deal this size with the Babe Ruth of investing? Ace had to be part of that. He reached Kirk within an hour of the announcement. “I can make a whole team of people available to help you if you need it,” he said. In response, Kirk was cordial but noncommittal. “Sit tight,” he told Ace.

  Alex Yemenidjian, the tax accountant turned Tracinda executive and one of Kirk’s front men on the Chrysler deal, met the media, investment analysts, and bankers later that morning on a conference call originating out of Las Vegas. Listening in from Detroit were Bob Eaton and a large cluster of Chrysler execs.

  Kirk’s man touted his boss as a great champion of Chrysler shareholders, but his audience pressed for answers to the bigger question: Where was Kirk getting $22.8 billion?

  The answers were surprisingly vague. Some of it was coming out of Chrysler, from Eaton’s rainy day cash reserves. But Yemenidjian acknowledged most of the financial backing was still to be arranged. They rushed the public announcement, he seemed to be saying, to avoid the risk of leaks.

  What Chrysler heard, however, was an admission of weakness. Without the apparent backing of any big investment banks or some wealthy foreign interests, the company had more than a fighting chance to repel what it described publicly as “an unsolicited offer.” Team Kerkorian didn’t like that choice of words. It didn’t sound friendly, and it was barely passive. Something wasn’t right.

  On top of that came a Bloomberg Business News report that Kerkorian had hired Bear Stearns. It was like a cascade of warning bells going off in one of Kirk’s cockpits. He turned to his advisers. Who hired Ace? He got only blank stares. Ace must have sai
d too much to a friendly reporter. Yemenidjian tracked him down to reiterate: “We’re not ready to bring you on yet.” Stand by, he advised, and please avoid journalists.

  When stock markets closed that hectic afternoon, Chrysler shares were up nearly 25 percent for the day. Kirk’s one-day paper profit was $342 million. That computed to a rate of return over a twenty-four-hour period of about $14 million an hour. But it didn’t buy happiness.

  By morning there were more alarming signals. The Chrysler board had unanimously approved a statement declaring: “The company is not for sale.” In the company’s press release, Eaton had gone a step further, making “absolutely clear that Chrysler management is in no way involved” in the Kerkorian deal.

  That scent in the air was trouble. Big trouble. Team Kerkorian detected betrayal.

  Chrysler was portraying the deal as unwelcome. The company was going into a fighting crouch. And Kirk was cast as the bad guy—or, as the New York Times called him that morning, “one of the country’s shrewdest but most ruthless corporate raiders.”2

  It wasn’t supposed to be that way. Kirk was outwardly calm, as usual, but deeply frustrated and privately troubled by the harsh characterizations. He did not, however, lash out publicly. But to his team he seemed genuinely puzzled when he said, “It wasn’t supposed to be hostile.”

  Kirk, who was about to turn seventy-eight, and his more famous investment partner, Lee Iacocca, seventy, both sons of immigrants, were considered something of an odd couple—the shy financier and the charismatic salesman. They first met over airplanes back in 1989.

  Chrysler had acquired Gulfstream, the Georgia-based maker of popular business jets, and Kirk was shopping. Nothing came of Kirk’s interest in Gulfstream—either as an investor or a customer—but in 1990 as the auto industry wallowed into recession, Kirk made a special trip to talk cars with Iacocca. He flew to Detroit.

  “He came in a 727 . . . this huge plane and just Kerkorian on it,” Iacocca recalled in a Los Angeles Times interview.3

  Chrysler stock prices had been wallowing around $20 per share through the past year but had recently fallen to nearly $10. Was the company in danger of bankruptcy, Kirk asked. What were its prospects?

  Iacocca, the salesman who had talked Congress into authorizing $1.5 billion in loan guarantees a decade earlier, was enthusiastic about Chrysler’s ability to weather the recession, the great new product line in development, and its profitable future. No, said Iacocca, there was no fear of bankruptcy.

  That’s why Kirk didn’t need Bear Stearns analysts to tell him how to invest—or how to hold his bat. He had heard all he needed to know from his friend in high places. Chrysler was golden. And Kirk’s first $272 million Chrysler stock purchase in 1990 had gone a long way to enhancing the company’s luster in the investment community.

  “That started a wonderful relationship,” Iacocca said in the immediate glow of their takeover offer. “He has never sold a share of Chrysler stock. Everyone should have a shareholder like him.”

  But strains on that friendship began to show almost immediately as their bid ran into stiff resistance. Iacocca had expected to be hailed as some kind of hero for raising Chrysler’s value in such a daring and historic privatization move. Instead, the same New York Times editorial that called Kirk a ruthless corporate raider had also kicked Iacocca in the teeth. It called his role in the “reckless” takeover bid “a destructive, self-indulgent conclusion to a distinguished career”4 that would pile debt on the automaker and endanger its future.

  From Palm Springs, where Iacocca had adjourned for the Easter weekend, the former Chrysler chief launched a personal PR offensive. Talking to auto and business writers around the country, he defended the creative deal, blamed a couple of unnamed accountants on the Kerkorian team for tactical mistakes, and suggested that an undervalued Chrysler was lucky to have him and Kirk stepping in before anyone else.

  But he also told the Detroit News that this was “a Kirk Kerkorian deal,” that it still needed cash, and—in a quote made all the more inflammatory because it was set in bold 28-point headline type on the front page—that Kerkorian had to “‘get cranking on financing. It’s not there, yet.’”5 He even imposed an unnecessary deadline on their loan hunt, saying that Kirk had only “a 10-day window” to arrange financing, or he would fail.

  The expletives erupting out of Tracinda headquarters in Las Vegas were never put on the record, but Iacocca was summoned immediately—his Easter afternoon with family canceled. At Kirk’s insistence, his partner was heading to New York City “to get cranking,” hard feelings notwithstanding, as part of Team Kerkorian to help round up cash for the deal.

  Investment analysts were dazzled by Chrysler’s aggressive and effective response to the Kerkorian-Iacocca deal—a collection of strategies that included new poison pill provisions, threats to abandon any bank that dared help finance any part of the deal, and heart-to-hearts with the likes of Bear Stearns.

  Ace Greenberg’s earlier role raising nearly a billion dollars for Kirk’s new MGM Grand Hotel made him a target of concern even before the Bloomberg News story linked them. But Chrysler had its own leverage. Bear Stearns had earned more than $10 million in fees over the previous five years managing $4 billion in Chrysler bonds. The investment banker had a conflict of interest that Chrysler’s lawyers would point out. Besides, Bear Stearns could easily be replaced. Ace got that message.

  On the Wednesday after Easter, Alex Yemenidjian was getting ready to meet bankers in New York when the phone in his hotel room rang at 7 a.m. It was Greenberg. And it was especially early for a Tracinda executive from the Pacific Time zone. But Ace launched into a description of his dilemma about lawyers and conflicts.

  “Do you have any objection if we get back to the Chrysler lawyers and say we haven’t done any business with you?” Greenberg asked.

  Of course not, Yemenidjian shrugged. “That’s the truth.”

  Two hours later a Wall Street Journal reporter reached Yemenidjian and said his newspaper was running a story revealing that Bear Stearns had pulled out of the deal—unless the Kerkorian camp denied it.

  “Are you kidding?” Yemenidjian exploded. They couldn’t pull out, he tried to explain, because they were never in the deal. Nonetheless, the Journal reported that Bear Stearns was out. As Alex saw it, Ace had covered his ass at Kirk’s expense.

  Yemenidjian called Greenberg for one last angry rant. Bear Stearns was hereby dead to Kerkorian. The Babe Ruth of investing would never again bat for Ace—not if Alex had anything to say about it.

  But venting didn’t alter the facts. What appeared to the world to be a Bear Stearns retreat was a serious blow to what little momentum the Kerkorian side had going for it. Only Bank of America, Kirk’s loyal lender for a half century, was willing to even consider the deal—and it would do so only if at least one other major bank came along.

  Time was slipping away. Iacocca’s ten-day deadline came and went. Chrysler upped the ante by taking out an $8 billion line of credit spread around sixty-one different banks. Kirk explored foreign alliances. He tried to goad Eaton into putting a sweetened $55 per share offer to a vote of the stockholders. He met with a takeover expert. He hired a public relations consultant. He did not quit. He did not sell any of his Chrysler shares, even though his paper profits approached a billion dollars.

  The company floated a secret approach to see if Kirk had a price to walk away. What would it cost to buy out his thirty-six million shares? Offended that he would be cast as a greedy “greenmailer,” Kirk could no longer utter Eaton’s name without a profanity.

  Yemenidjian went public with the secret overture, telling the Wall Street Journal that Kerkorian “will not sell at any price unless all other holders are offered similar terms.”6

  Seven weeks after shaking up Chrysler and the investment world, Kirk withdrew his original bid for the company and his $55 per share sweetener. A brief press release from Tracinda ended the takeover drama. Kirk did not, however, sell a sin
gle share of his $1.5 billion Chrysler portfolio. Eaton knew what that meant. Kirk wasn’t going away.

  Fortress Chrysler would be stormed again.

  When Kirk returned a couple months later, he announced himself with another $700 million Chrysler stock purchase financed by an $800 million loan from Bank of America. His holdings now reached fifty million shares, slightly more than 14 percent. He was also wooing former Chrysler executive Jerry York away from his chairman’s seat at IBM. Kirk would propose replacing “that (expletive) guy, Eaton” with York.

  Meanwhile, Team Kerkorian had pretty much frozen out Iacocca whose frequent complaining had reached a level of nuisance that was driving “the Perry Como of the craps table” absolutely mad. To be fair, Iacocca had been especially hard hit by vindictive Chrysler officials who rescinded about $45 million in Iacocca’s stock options, alleging conduct detrimental to the company.

  A woman on Kerkorian’s newly retained public relations staff was assigned to take all of Iacocca’s calls and to listen intently and sympathetically—regardless of the hours—to his angry tirades about what was happening . . . or not happening. Her broader mission was also to encourage Iacocca to stay away from the press.

  While pressure continued to build on the Chrysler takeover front in their business world, the personal lives of both Kirk and Iacocca grew more complicated, too. Darrien Iacocca sued for divorce. She rejected Lee’s first $4 million settlement offer.

  After four years together Kirk and Lisa Bonder, his tennis and yachting partner, were bickering more and enjoying each other less. But what troubled Kirk most was learning that she talked with friends about using Kirk to become the richest woman in the world. He gave her a five-carat diamond ring for her thirtieth birthday in October 1995, and two months later told her to move out. Lisa and her now six-year-old son from her previous marriage moved in with Darrien Iacocca.7

 

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