Chapter 11 - Bear Hug, February 19 – 25, 2002 - episode 4Listen to podcast
On Friday, February 22, 2002, hackoff stock closed down twenty-six cents at exactly one dollar. At the beginning of the week it had been above two dollars.
On Sunday night, Louise answers the phone at the Lazard home. “Larry,” says Louise, “it’s George Wrobly on the second line.”
“What the fuck’s he want?” asks Larry.
“Why don’t you talk to him and find out? He’s on hold.”
“Lazard,” Larry says when he picks up the phone.
“Larry,” says Wrobly, “this is George Wrobly, antihack CEO. How are you?”
“I thought it was George Wrobly, the milkman,” says Larry. “What the fuck do you want?”
“Rough webcast last week,” says Wrobly.
“What do you want?” Larry repeats.
“Larry, you know we at antihack have a lot of respect for what you’ve accomplished at hackoff. Together with us, you’ve helped build an industry—”
“George, we haven’t done shit together. We innovate; you guys copy us. Tell me what the fuck you want or I’m hanging up the phone.”
“The Street hasn’t been kind to either of our stocks lately,” says Wrobly. “But it’s been particularly unkind to hackoff. We think it’s time to reopen discussions about a merger.”
“We never OPENED discussions. There’s nothing to reopen.”
“I think if it hadn’t been for the unfortunate events of 9/11…”
“Bullshit,” snaps Larry. “Do you want us to buy you? That what this call is about?”
“No, Larry. I don’t think you’re being realistic. I have authorization from my Board to open discussions with you on a friendly acquisition of hackoff by antihack.”
“Talk about not being realistic, you asshole. What are you going to use to buy us with? Your overpriced stock? Your borrowed cash that you’re running through? You just want our cash to pay back your fucking debt. You want to steal our equity portfolio.”
“We’re prepared to make you President of the combined company,” says Wrobly.
“George, there is no way in fucking hell I would work for you. Do you think offering me a job is going to make me sell my company to you assholes?”
“Larry, I think you’re making a mistake. The combined company will be very strong and I’m sure you could make a significant contribution to it.” Wrobly seems relieved that Larry has not accepted this part of his offer. He continues: “ If you would rather look for other opportunities after the acquisition, we would be prepared to offer you a substantial settlement in return for help with the transition and a non-compete. Frankly, Larry, if you’ll let me give you some friendly advice…”
“George, you are not my friend so stuff the advice. Forget trying to bribe me to sell out the company; it’s not gonna happen. Forget about a friendly acquisition.”
“Larry, are you saying that you won’t even listen to an offer? I don’t think that’s consistent with your fiduciary responsibility to your shareholders.”
“George, who’s in the room with you?” asks Larry.
“Just a second, please...” The line goes still as Wrobly mutes the phone.
Larry hangs up. In a few minutes, the phone rings again. Larry writes down the caller ID but doesn’t answer. Instead he goes to his computer; enters the URL for www.411.com; and does a reverse lookup of the phone number.
The next time the phone rings, the caller ID is the same and Larry answers. “George, you’re in your fucking lawyer’s office. How many lawyers you got standing around listening to our ‘friendly’ call?”
“We’re very serious about this, Larry,” says Wrobly. “I do have our corporate counsel with me and representation from our outside firm of—”
“George, anyone ever tell you it’s polite to tell someone when you have other people listening in on a call? Anyone ever tell you that it’s especially important when those other people are fucking lawyers and the other party doesn’t have a lawyer present? Anyone ever tell you that?” He hangs up.
The phone doesn’t ring again.
Larry calls Aaron Smyth and gives him an almost verbatim account of the call with Wrobly.
“Can’t fault their timing with our stock under a buck,” says Aaron. “For now we’re okay. You do have a responsibility to listen to offers but there is no way you have to be on a call with attorneys present without having representation of your own. One of the few things no one could sue us for. I’m surprised they fucked up this way.”
“I don’t think Wrobly thought I’d figure out there were other people there,” says Larry. “But he kept turning his mouth away from the phone so I knew he was trying to get clues from someone ... asshole.”
“Now we’re going to have to hire a takeover firm,” says Aaron. “They’ll be back and we’ll have to deal with them properly.”
“What kind of takeover firm?”
“A takeover law firm. They’re going to make some kind of offer. We probably won’t like it. We need to be prepared to fight.”
“We don’t like it, we just say ‘no’. How many lawyers does it take to say ‘no’?”
“It’s a specialty like anything else. We have to have the best legal counsel we can get — and bankers. Maybe Barcourt again.”
“We’ve got to pay a BANKER? ”
“Millions,” affirms Aaron.
“For a fairness opinion, at least. At most, we want to look around and see if there are other offers. We have to do what’s right for the shareholders. More important, we have to APPEAR to do what’s right for the shareholders.”
“It’s not right to spend millions of dollars of their money just because an asshole like George Wrobly calls me up and tries to bribe me in an effort to steal my company. They’ll call back; you’ll be on the phone. We’ll listen to their offer; take notes’ then say ‘no fucking way’. Don’t need to pay a banker and lawyers to do that. Don’t want to have a banker out looking for other people that want to steal the company at this price either.”
“Larry,” says Aaron, “it sucks but that’s what we’re going to have to do. Also we’ve got to have a Board meeting right away. You need to give the Board a heads-up on what happened tonight.”
“Right. We do need to talk to the Board. Hope those pussies have some balls. This is gonna be a fight. Okay if we wait ‘til morning? It’s after ten.”
“I think you ought to try to get to them now,” says Aaron. “At least it’s got to be clear that you tried. Wrobly and his lawyers gave you a little breathing room by fucking up but they’ll be back. Better we use the time as best we can and be prepared for them.”
“Okay... I’m saying ‘okay’ to calling the Board and trying to set up a meeting as soon as we can. I’m not okay with extra lawyers and hiring bankers and all that crap. But you better be prepared to discuss it all with the Board. I’m going to try to get us set up for eleven tonight, or twelve. Can you do that?”
“Not much choice,” says Aaron.
Larry’s next call is to Donna. Again, he describes the call with Wrobly.
“Can’t fault their timing with our stock under a buck,” says Donna. “Maybe we have to consider it.”
“WHAT?” Larry shouts. “Why the fuck would we merge with those assholes?”
“Because we’d own the industry. We’d be the only serious source for anti‑hacker protection. Because we’re not making it on our own, Larry, face it. You want to do more quarterly webcasts like the one we did last week?”
“Bullshit. Monitored Service is gonna work. The portfolio will regain value. This is the bottom. That’s not the time to give up.”
“Larry, look, you’ve done a great job so far, but the market’s turned against us. In hindsight, maybe so much reliance on equity wasn’t a good idea. We’re late getting Monitored Service out and it will be a long, tough road to make it successful. That’s all a lot easier if we’re not competing with antihack anymore, if we have their customers AND ours to sell Monitored Service to. Think about it.”
“Donna, you think about it. You think a company’s gonna work with George Wrobly running it? That pussy couldn’t find his way out of a paper bag. Over my dead body!”
“Is that your problem, Larry? Is it all about ego? All about you won’t be the chairman and CEO of the new company? Is that what’s bothering you? Look, from what you told me about Wrobly’s call you can be in or you can be out with a big settlement. Either way, you’re a big stockholder. The new company wins, you win too.”
“The new company isn’t going to do shit with Wrobly as CEO,” says Larry. “It isn’t about me. Shit, I don’t care if I retire and go mushroom hunting for the rest of my life or take the money and start another new company. But Wrobly can’t run this one. He’s not up to it. And I’m not gonna get bribed to leave and have him fuck up everything I’ve … we’ve done.”
“Lar, this shouldn’t be personal. It’s not about us. It’s about knowing when to hold ‘em and knowing when to fold ‘em. This may be the best time to get out. We’ve got to listen.”
“I’m setting up a Board call for eleven,” says Larry coldly. “I thought you’d be on the right side on this but, either way, I fight. And it starts with the Board. Can you make eleven? It’ll be on my conference bridge.”
Call-waiting chirps on Donna’s phone. “Just a second, Lar, I’ve got another call.”
The other caller is George Wrobly. Donna tells him she’ll get back to him in ten minutes, then tells Larry: “Can’t do eleven, Lar, I’m sorry.”
“What do you mean you can’t do eleven? This is such a great opportunity we have to listen to that asshole Wrobly and now you don’t have time for a Board call?”
“I can’t do eleven, Larry. What about eleven-thirty? Twelve? Tomorrow morning?”
“Twelve. I’ll get back to you if the others can’t make it.” He hangs up without waiting for an answer.
Donna goes into the bedroom and wakes her husband. “Francis,” she says, “this may be the opportunity we’ve been waiting for.” She tells him about Wrobly’s call to Larry; Larry’s call to her; and the call she received from Wrobly. “But Larry’s right, Wrobly is a ‘pussy’ and he can’t run the combined company, at least for long.”
“And that’s the opportunity you see, babe?”
“That’s the opportunity. I assume Wrobly’ll offer me the CFO slot. He’s got some jerk in there now. But then how do we move Wrobly out so I can take over before he wrecks the whole thing? Merging the companies’ll be tough. He doesn’t have the balls for it; he could fuck it up.”
“He have the hots for you?”
“No. No interest as far as I can tell.”
“I don’t think so. I don’t think that’s his weakness.”
“Francis, I’m being realistic, not modest. I don’t think that’s how we get rid of Wrobly.”
“Is he gay?”
“Don’t think so. I think he just isn’t much below the belt. He’s a glad hander, a lightweight; and I don’t think he cares much about sticking his cock anywhere.”
“It’s a gamble, babe,” says Francis. “You could end up working for the jerk for too long and the company goes down the tubes. Other hand, he’s as weak as you say he is, we ought to be able to figure out something. You got to make sure you have plenty of exposure to the Board. You’ve got to have a Board seat like you have at hackoff so they know you when the time comes. Thing to do now is listen hard to what he’s about to offer you.”
“Otherwise I’m stuck with Larry... He was a good founder. He sucks now. Gotta look at making a move.”
“You record the call,” says Francis. “And you assume he’s recording the call, too. Probably has someone else listening, telling him what to say, just like he did on the call with Larry. So you don’t say anything you don’t want recorded. Let him talk... Good luck.”
“This is a very irregular call,” says Donna to Wrobly a few minutes later. “I’m returning it only because I have a duty to my stockholders to listen to whatever it is that you might want to say.”
“Right,” says Wrobly. “I assume that our friend Larry told you about the call he and I had.”
“I’m certainly not going to discuss any communications I had with my CEO."
“Right,” says Wrobly again. “Well, in case you don’t know, we’re interested in making an offer for hackoff.”
“Have you made an offer?” Donna asks.
“Not officially. My conversation with Larry didn’t get that far.”
“Are you going to?”
“We’d like it to be friendly. We think that’s better all around.”
“Of course,” says Donna. “What did you want to talk to me about?”
“When we put the companies together,” says Wrobly, “it’s important that we get the best person into each slot in the combined company, regardless of which company they came from originally.”
“Of course,” says Donna.
“And people we don’t have slots for, it’s important that we treat them well. It’s important that we be fair. We don’t want there to be any losers, just winners.”
“Of course,” Donna says again.
“So, for example,” says Wrobly, “let’s take Dom Montain. We’d want him to be the CTO of the combined company. Do you think he’d consider that position?”
“I agree that he’d be the right person. He has lots of offers, lots of opportunities. He also has a lot of stock he never sold that he’s pretty bitter about and he has lots of options that are way underwater. I think we’d … you’d have to find a way to make him feel that he’s going to get whole. He also needs to feel very appreciated. If he doesn’t think he’s respected, he’s outta here no matter how many dollars or options you throw at him.”
“That’s just the kind of input I was hoping for, Donna. I think you can be a huge help during a transition. You know the company; you helped build it. You know the players. I’m sure they all respect you.”
“And it’s very important that we have your full cooperation during a transition.”
Donna is silent.
“For that reason, we’re prepared to offer you a very generous package contingent only on your cooperation during the transition and, of course, a non-compete.”
“You see whats-his-name — Marvin — staying on as your CFO?” asks Donna in a choked voice.
“Well, of course,” says Wrobly, “just as I’ll stay on as CEO. But we are prepared to…”
“What about…” Donna looks up to see Francis, who has been listening, signaling her to silence.
“What about what?”
“Nothing. Go ahead.”
“Well, I think that’s about it. I mean it’s too soon to be specific but I just wanted you to know our intent, that we intend to treat you very fairly and very well. You could come out of this a very rich lady.”
“I think you’re trying to bribe me,” says Donna. “I think you’re trying to buy me off in an improper way. My opinion on your offer, if we ever see your offer, will be based purely on the interests of the hackoff shareholders, not on some special deal you offer me. This call is improper. I listened to it because I thought my duty to shareholders requires that. But I am not going to be bribed.” She hangs up.
Donna looks aged. Her cheeks implode slightly, her shoulders hunch.
“You were great, babe,” says Francis. “You almost lost it for a minute but you were great.” He hugs her and she responds slightly, then pulls away.
“I don’t fucking believe it — Marvin for CFO. Maybe the fucker IS gay. Marvin might make a good controller; he can count. Ever hear him on a quarterly call? Ever shake his hand? I could’ve made this work. I don’t believe it.”
“Maybe you threaten him, babe. Maybe you’re too sexy; for sure, you’re too smart. Guys like him, they get spooked easy. Maybe he senses you’d have his job in six months.”
“I mean I’m still stuck with Larry,” says Donna.
“You have me. We’ll figure a way to make things happen. We’ve figured things out up to now. We’re a great team and the beauty is no one knows it.” He hugs her again.
“Sometimes I believe that,” says Donna. “Sometimes I do.” She rubs the back of his neck. “Why don’t you take one of those magic purple pills? That way when I get off the Board call, you’ll be ready.”
“For you, anything,” says Francis.