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The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders by Connie Bruck
corporate raider, diversified portfolio, Edward Thorp, financial independence, fixed income, Irwin Jacobs, mortgage debt, offshore financial centre, paper trading, profit maximization, The Predators' Ball, yield management, Yogi Berra, zero-coupon bond
Overnight, all the rules of survival in the corporate jungle had been rewritten. The weak could become the strong, and the strong the weak. It must have not only excited but tickled the fancy of Milken, an amateur magician who occasionally does tricks for his friends, to be able to wave this particular wand. The honored guests of this conference, therefore, were the takeover artists and their biggest backers—men like T. Boone Pickens, Carl Icahn, Irwin Jacobs, Sir James Goldsmith, Oscar Wyatt, Saul Steinberg, Ivan Boesky, Carl Lindner, the Belzbergs—and lesser lights about to shine, such as Nelson Peltz, Ronald Perelman, William Farley. The names tend to meld into a kind of raiders’ litany, but they are not all the same. For Milken, they would have separate roles during the coming months, performing discrete functions in a vast, interlocking machine of which he alone would know all the parts.
In addition to Drexel’s female employees, there were a number of extremely attractive young women at this dinner—so good-looking, in fact, that one takeover lawyer, George Katz of New York’s Wachtell, Lipton, Rosen and Katz, renowned for his naiveté, remarked to a companion, “I’ve got to hand it to these guys—I’ve never seen so many beautiful wives!” In fact few if any wives attended this dinner. An assessment closer to the mark was made by arbitrageur Martin Weinstein, who, noting that Irwin Jacobs had been deep in conversation for hours with one of these women at the far end of the room, commented to a friend, “Tell Irwin he doesn’t have to work so hard. She’s already paid for.” According to Julian Schroeder, a former corporate finance partner at Drexel, the “girls” have been a staple of the conference since the early years. They were seen as necessary bait for clients in the days when Drexel was “laughed at” by those whom he and his colleagues called for business.
Money, as Ivan Boesky once told a group of prospective investors in his arbitrage partnership, was falling off the trees. It was a glorified road show for the buyers and for the scores of companies that made presentations, many of whom would soon be doing junk-bond offerings. It was a reunion for Milken’s high-rollers, whose camaraderie, if not collusion, he encouraged. One Drexel lawyer later recalled having seen Ivan Boesky, Carl Icahn, Carl Lindner and Irwin Jacobs huddled in a corner. “Anything could have been happening there,” he remarked with a laugh. It was a good time. Bungalow 8 would not soon be forgotten, and client loyalty gets forged in sundry ways. And it launched Milken’s now full-blown tour de force. Within the first two weeks of April 1985, hard on the heels of the Predators’ Ball, five more Drexel clients—in addition to Triangle Industries—would make bids for companies, all backed by Milken’s junk bonds.
King Icahn: The Biography of a Renegade Capitalist by Mark Stevens
So we wanted to take care of Boesky. But Carl never felt any such need. Carl is always so into himself, he doesn’t think about helping someone else. He won’t give you ice in the winter.” The Boesky block gave Carl greater leverage in his takeover bid and, as a backup, provided a greater profit opportunity should another raider or corporate suitor make a run at Phillips. At this point, Minneapolis-based takeover artist Irwin Jacobs (aka “Irv the Liquidator”) had a stake in Phillips and Pennzoil was known to be sniffing around. If either one or others waiting in the wings, made a move on the company, the stock price would soar, giving Icahn a profitable exit. He knew, though, that he was maneuvering the treacherous waters and that the circumstances could change rapidly. His bet was that Jacobs was going to remain a passive player, angling to earn a profit from the sidelines.
Company policies covering the simplest matters went on for twenty pages and for every job that needed one person to do the work, they had five. Visitors would whisper that the company reminded them of the army, but those of us who were here long enough to look beneath the surface knew that it was much worse. “That Icahn would want any part of this place shocked us.” But to Icahn and a flock of raiders, including Robert Holmes á Court, Boone Pickens and Irwin Jacobs, then circling the company like so many vultures, how USX conducted its business was irrelevant. All that mattered were the assets, steel and energy. Icahn dreamed of spinning off steel and allowing the energy unit to reach its true high-water mark. Although Icahn was not the first or the only observer to see the potential inherent in such a spin off, he alone would make it a cause célèbre. Determined to emerge as a force management would have to reckon with, Icahn and an investor group headed by him purchased 9.8 percent of USX stock for prices ranging from $17.50 to $26.25 a share in the late summer and fall of 1986, and then turned up the heat on October 6th by making a “friendly” offer to buy the balance of the company’s 259 million outstanding shares for $31 each, for a total of about $8 billion.
ALL THE KING’S HORSES AND ALL THE KING’S MEN “Carl can’t understand why people don’t have a burning desire to make him rich.” -Joe Corr, former TWA president As the Roaring Eighties faded into the history books, the infamous raiders of the bygone decade receded from the headlines, opting for less exposure and more traditional business pursuits. Saul Steinberg turned his attention back to his Reliance Insurance holding and to the Park Avenue social whirlwind embraced by his wife Gayfryd. Irwin Jacobs focused on the Minneapolis-based yachting business and Sir James Goldsmith, once the most flamboyant of raiders, took his fortune and virtually disappeared. As much as Carl Icahn might have liked to perform a disappearing act of his own, transforming himself from a high-profile raider into a behind-the-scenes investor in troubled businesses, the continuing saga of beleaguered TWA kept him in the spotlight.
Den of Thieves by James B. Stewart
corporate raider, creative destruction, discounted cash flows, diversified portfolio, fixed income, fudge factor, George Gilder, index arbitrage, Internet Archive, Irwin Jacobs, margin call, money market fund, Ponzi scheme, rolodex, Ronald Reagan, shareholder value, South Sea Bubble, The Predators' Ball, walking around money, zero-coupon bond
He knew that the key to many client relationships was their personal lives, not their business. He came to know virtually everything about the lives of his clients, including their problems with their wives and mistresses. He wasn't judgmental. On the contrary, he shared many of their appetites. Among Drexel's important clients, Engel was given credit for landing Ronald Perelman, Nelson Peltz, Jerome Kohlberg, Gerald Tsai, Irwin Jacobs, and the Haft and Pritzker families. Engel found a kindred spirit in Milken. They referred facetiously to the wealthy establishment as "the white guys." They didn't care much about them. For Drexel, they wanted clients like Herb Haft, a man whose blow-dried, cone-shaped snow white hair made him look like a character from "Star Trek." Scoflfed at by most of Wall Street, Haft had been poor, and he was hungry, with "fire in his belly," as Engel liked to say.
Waiters carrying champagne and cocktails threaded their way through the crowd. That year's guest list was practically a who's-who of self-made multimillionaires of the 80s: Merv Adelson, Norman Alexander, Henry Kravis, George Roberts, Boone Pickens, John Kluge, Fred Carr, Marvin Davis, Barry Diller, William Farley, Harold Geneen, Rupert Murdoch, Steve Ross, Ron Perelman, Peter Grace, Sam Heyman, Carl Icahn, Ralph Ingersoll, Irwin Jacobs, William McGowan, David Mahoney, Martin Davis, John Malone, Peter Ueberroth, David Murdock, Jay and Robert Pritzker, Samuel and Mark Belzberg, Carl Lindner, Nelson Peltz, Saul Steinberg, Craig McCaw, Frank Lorenzo, Peter May, Steve Wynn, James Wolfensohn, Oscar Wyatt, Gerald Tsai, Roger Stone, Harold Simmons, Sir James Goldsmith, Mel Simon, Henry Gluck, Ray Irani, Peter Magowan, Alan Bond, Ted Turner, Robert Maxwell, Kirk Kerkorian.
page 103 Ronald Perelman was head of MacAndrews & Forbes and launched a hostile takeover of Revlon. Nelson Peltz, head of Triangle Industries, acquired National Can and then bought American Can from Primerica. He sold American National Can to Pechiney, the French packaging company. Gerald Tsai was chairman of Primerica, which he reshaped into a financial services concern which owns Smith Barney, the brokerage firm. Irwin Jacobs is a corporate raider based in Minneapolis. The Hafts became corporate raiders, launching an unsuccessful bid for Safeway Stores. The Pritzker family owns Hyatt Hotels Corporation and invests in numerous other ventures. page 104 Carr has denied being part of any scheme to free Posner from the standstill agreement. page 104 While based on independent reporting, the text's account of the Fischbach transaction closely parallels that set forth in Government's Milken memo, pp. 30-37 (redacted).
Wall Street: How It Works And for Whom by Doug Henwood
accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, plutocrats, Plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond
GOVERNANCE Jensen especially celebrated LBOs engineered by boutiques like Kohlberg Kravis Roberts (KKR) and Clayton & Dubalier; "entrepreneurs" like Carl Icahn, Ronald Perelman, Irwin Jacobs, and Warren Buffett; merchant banking arms of Morgan Stanley and Lazard Freres; and families like the Pritzkers and Bronfmans. These fine people — the forgotten stars of the largely forgotten 1980s — should be trusted to run corporate America like a stock portfolio, from their thinly staffed (20 to 60 people) home offices, transforming the industrial cities of yesteryear into ghost towns. With all its vast increases in data, talent, and technology. Wall Street can allocate capital among competing businesses and monitor and discipline management more effectively than the CEO and headquarters staff of the typical diversified company. KKR's New York offices and Irwin Jacobs' Minneapolis base are direct substitutes for corporate headquarters in Akron and Peoria.
One Up on Wall Street by Peter Lynch
air freight, Apple's 1984 Super Bowl advert, buy and hold, corporate raider, cuban missile crisis, Donald Trump, fixed income, index fund, Irwin Jacobs, Isaac Newton, large denomination, money market fund, prediction markets, random walk, shareholder value, Silicon Valley, Y2K, Yom Kippur War, zero-sum game
I was convinced that Gulf Oil was too big to be taken over—right up to the day that Chevron did it. Now I’m ready to believe that anything could be taken over, including the larger continents.) With so many raiders around, it’s harder for the amateur to find a good asset stock, but it’s a cinch to know when to sell. You don’t sell until the Bass brothers show up, and if it’s not the Bass brothers, then it’s certain to be Steinberg, Icahn, the Belzbergs, the Pritzkers, Irwin Jacobs, Sir James Goldsmith, Donald Trump, Boone Pickens, or maybe even Merv Griffin. After that, there could be a takeover, a bidding war, or a leveraged buyout to double, triple or quadruple the stock price. Other sell signs: • Although the shares sell at a discount to real market value, management has announced it will issue 10 percent more shares to help finance a diversification program. • The division that was expected to be sold for $20 million only brings $12 million in the actual sale
Liar's Poker by Michael Lewis
barriers to entry, Bonfire of the Vanities, business cycle, cognitive dissonance, corporate governance, corporate raider, financial independence, financial innovation, fixed income, Home mortgage interest deduction, interest rate swap, Irwin Jacobs, John Meriwether, London Interbank Offered Rate, margin call, mortgage tax deduction, nuclear winter, Ponzi scheme, The Predators' Ball, yield curve
A take-over of a large corporation could generate billions of dollars' worth of junk bonds, for not only would new junk be issued, but the increased leverage transformed the outstanding bonds of a former blue-chip corporation to junk. To raid corporations, however, Milken needed a few hit men. The new and exciting job of invading corporate boardrooms appealed mainly to men of modest experience in business and a great deal of interest in becoming rich. Milken funded the dreams of every corporate raider of note: Ronald Perelman, Boone Pickens, Carl Icahn, Mar-vin Davis, Irwin Jacobs, Sir James Goldsmith, Nelson Peltz, Samuel Heyman, Saul Steinberg, and Asher Edelman. "If you don't inherit it, you have to borrow it," says one. Most sold junk bonds through Drexel to raise money to storm such hitherto unassailable fortresses as Revlon, Phillips Petroleum, Unocal, TWA, Disney, AFC, Crown Zellerbach, National Can, and Union Carbide. It was an unexpected opportunity, not just for them but for Milken, for he certainly did not have the overhaul of corporate America in mind when he envisioned his junk bond market in 1970.
Transaction Man: The Rise of the Deal and the Decline of the American Dream by Nicholas Lemann
Affordable Care Act / Obamacare, Airbnb, airline deregulation, Albert Einstein, augmented reality, basic income, Bernie Sanders, Black-Scholes formula, buy and hold, capital controls, computerized trading, corporate governance, cryptocurrency, Daniel Kahneman / Amos Tversky, dematerialisation, diversified portfolio, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, fixed income, future of work, George Akerlof, gig economy, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, index fund, information asymmetry, invisible hand, Irwin Jacobs, Joi Ito, Joseph Schumpeter, Kenneth Arrow, Kickstarter, life extension, Long Term Capital Management, Mark Zuckerberg, mass immigration, means of production, Metcalfe’s law, money market fund, Mont Pelerin Society, moral hazard, Myron Scholes, new economy, Norman Mailer, obamacare, Paul Samuelson, Peter Thiel, price mechanism, principal–agent problem, profit maximization, quantitative trading / quantitative ﬁnance, Ralph Nader, Richard Thaler, road to serfdom, Robert Bork, Robert Metcalfe, rolodex, Ronald Coase, Ronald Reagan, Sand Hill Road, shareholder value, short selling, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, TaskRabbit, The Nature of the Firm, the payments system, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, transaction costs, universal basic income, War on Poverty, white flight, working poor
Within a few years, he had become the leading public advocate and justifier of a number of new techniques in the financial world that suddenly became pervasive: a large increase in mergers and acquisitions, including hostile ones; the development of the junk-bond market, whose high-risk, high-return instruments often financed these activities; enormous raises in the compensation of corporate chief executives, often in the form of stock options; the onset of leveraged buyouts and private equity as ways for financiers to take direct, usually temporary control of formerly publicly held companies. For a new coterie of raiders and financiers of a type Adolf Berle could hardly have imagined—Carl Icahn and Michael Milken, T. Boone Pickens and Irwin Jacobs—Jensen was the provider of the accompanying public philosophy, the scholar who could explain why their techniques were good for America. Between 1981 and 1983 alone, there were more than two thousand corporate takeovers a year valued at more than $1 million, far more than the country had ever seen, enabled in part by Ronald Reagan’s new administration in Washington signaling that it was going to interpret the antitrust laws more loosely.
Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles by Michael Gross
Albert Einstein, Ayatollah Khomeini, bank run, Bernie Madoff, California gold rush, clean water, corporate raider, Donald Trump, estate planning, family office, financial independence, Irwin Jacobs, Joan Didion, Maui Hawaii, McMansion, mortgage debt, Norman Mailer, offshore financial centre, oil rush, passive investing, pension reform, Ponzi scheme, Right to Buy, Robert Bork, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Steve Wozniak, The Predators' Ball, transcontinental railway, yellow journalism
With that, I said, ‘What I want to do is find a cure for cancer.’ ” Gabriele’s death spurred an interest in brain, nutrition, and biotechnology research, which became his philanthropic focus. Another heartache followed the same year, when their eldest son from Gabriele’s first marriage drowned in an accident at twenty-three. Though devastated, Murdock didn’t falter in business. Within a year, he’d beaten another corporate raider, Irwin Jacobs, and taken over a troubled 104-year-old real estate company called Castle & Cook, which owned almost the entire 90,000-acre Hawaiian island of Lanai, and Dole Food, the pineapple and banana company that had been born there. Dole also owned 60,000 acres on other Hawaiian islands, 6,600 acres in California, and plantations in Thailand and the Philippines, where most of its fruit was grown. Murdock’s first announcement on becoming its chairman and CEO was a plan to convert Lanai from farmland to a luxury resort with two hotels and villas for the rich.
740 Park: The Story of the World's Richest Apartment Building by Michael Gross
Albert Einstein, anti-communist, Bonfire of the Vanities, California gold rush, corporate raider, cuban missile crisis, Donald Trump, Irwin Jacobs, Jarndyce and Jarndyce, McMansion, mortgage debt, Norman Mailer, offshore financial centre, oil shale / tar sands, plutocrats, Plutocrats, Ronald Reagan, sensible shoes, short selling, strikebreaker, The Predators' Ball, traveling salesman, Upton Sinclair, urban planning
Thomas, Barry Thomson, David Thorne, Ed Thorne, Francis Thorne, Julia Stimson Thorne, Landon Thorne, Peter Thorne, Cari Tio, Carlo Toresani, Jim Torpe, Bob Torre, Yvonne and Alberto Uribe, Diane van Amerongen, Hope van Beueren, Joan van Clefe, Anne van den Bergh, William vanden Heuvel, Anthony Gambrill Villa, Peter Villa, Elliott Vose, Carroll Wainwright, Anne Walton, Marshall Webb, David Weir, Catherine Whalen, Katharine Brewster Whipple, Joan Whiteman, Sue Wild, John Wilmerding, John Winslow, Barbara Swain Wittman, Cathy Yandell, Will Zeckendorf, William Zeckendorf Jr., Martin Zimet, Stanford and Eve Zimmerman, and Harvey Zimond. NOTES INTRODUCTION Steinberg wasn’t the only original greenmailer. In the 1980s, T. Boone Pickens Jr., Irwin Jacobs, and Carl Icahn were also credited with initiating the hardball tactic. The cooperative corporation owns the property, takes out a mortgage on the building, and pays the taxes, but the tenant-shareholders get the tax deductions for interest payments on the mortgage, again, proportional to the number of shares they hold. CHAPTER 1 A few of these one-family homes still stand, converted for use as consulates and museums.
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. Cohan
asset-backed security, call centre, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Deng Xiaoping, diversification, Financial Instability Hypothesis, fixed income, Hyman Minsky, Irwin Jacobs, John Meriwether, Long Term Capital Management, margin call, merger arbitrage, money market fund, moral hazard, mortgage debt, mutually assured destruction, Myron Scholes, New Journalism, Northern Rock, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, savings glut, shareholder value, sovereign wealth fund, too big to fail, traveling salesman, Y2K, yield curve
“Bear, Stearns is seen as a firm of bright, sharp entrepreneurs who are more self motivated or motivated for the individual gain of people within the firm rather than building a corporate entity for the long term,” observed Samuel L. Hayes at Harvard Business School. Leslie Wayne cited a number of instances where the firm appeared to have a conflict of interest—“for instance, acting as a market maker in the shares of one company at the same time it was waging a proxy battle against that company's management”—but plowed ahead anyway. She noted that the firm happily represented corporate raiders, such as Irwin Jacobs in his successful effort to snatch control of the moving company Bekins from the Belzberg family of Canada, another set of well-known raiders. Wayne also let a competitor take a potshot at the firm. “Bear Stearns has done an intelligent job of seeking segments that most people found to be too small, specialized or even vaguely repellent,” said George L. Ball, president and chief executive of Prudential-Bache Securities.
Conspiracy of Fools: A True Story by Kurt Eichenwald
Asian financial crisis, Burning Man, computerized trading, corporate raider, estate planning, forensic accounting, intangible asset, Irwin Jacobs, John Markoff, Long Term Capital Management, margin call, Negawatt, new economy, oil shock, price stability, pushing on a string, Ronald Reagan, transaction costs, value at risk, young professional
Both companies were pursuing a strategy based on the idea that fully deregulated markets were coming in the gas industry. Both understood that the biggest pipeline systems would be the winners. Both had been snapping up smaller pipelines and were often competing bidders. Fighting over scraps made no sense when they both could achieve their shared goal through a single merger—with each other. Segnar had plenty of other justifications for pushing the deal, but many of those went unmentioned. Irwin Jacobs, the feared corporate raider, was loading up on InterNorth stock. If Segnar didn’t take control of his own destiny, Jacobs might do it for him. A major acquisition, like HNG, would load the company up with debt and make it far less attractive as a candidate for a hostile takeover. Intrigued, Lay asked some questions and said he would get his best people working on the idea. For the next few days, he traveled through Europe with almost no sleep.