“How do you know all this?” Matt asked.
“When I flew to Houston in October to visit my sister, I decided to look Thorp over and check out some of their properties while I was there. I got the name of their banker, Charles Collins, from Max Thorp, and I called him when I got back here. Collins was desperately eager to ‘help’ Thorp find a buyer, and he talked his head off. In the course of our conversation, I began to suspect that the reason for his eagerness might be that he needs to get Thorp’s loans off his books. He called me last Thursday and told me Thorp was eager to work a deal with us and that they’d sell out very cheap. He urged me to reconsider and make them an offer. If we move quickly, I figure we can pick up any of Thorp’s properties for the amount of the mortgages on them, rather than their actual value, because Collins is about to foreclose and Thorp obviously knows it.”
“What makes you think he’s about to foreclose?”
Peter smiled a little. “I called a banker friend of mine in Dallas and asked if he knew Collins at Continental City Trust. He said he did, and he made a friendly phone call to Collins, ostensibly to commiserate about the sad state of banking in Texas. Collins told him the bank examiners were pressuring him to foreclose on several large, delinquent loans—including the ones to Thorp.” Peter paused in silent triumph, waiting for some sort of compliment from his dispassionate boss for the thoroughness and outcome of his research; what he got was a brief smile and an almost imperceptible nod of approval. It felt as if God had just blessed him. Buoyed up beyond all bounds of reason by that, Peter leaned forward in his chair. “Are you interested in hearing about some of the properties Thorp owns? A couple of them are prime parcels that could be developed and sold for a fortune.”
“I’m listening,” Matt said, though he wasn’t nearly as interested in buying and developing raw land as he was in buying commercial buildings.
“The best of Thorp’s properties is a very desirable fifteen-acre parcel of land two blocks from The Galleria which is an enormous and deluxe shopping center with its own hotels. Neiman-Marcus is in the Galleria complex; Saks Fifth Avenue and a lot of exclusive designer boutiques are close by, and the expressway is within sight. Thorp’s property is between the two shopping complexes, and it’s the perfect site for another top-quality department store and mall.”
“I’ve seen the area when I was there on business,” Matt put in.
“Then you surely know what a bargain it would be if we could buy that piece of land for the twenty million Thorp owes on it. We could either develop it ourselves or hold on to the land and sell it later for a nice profit. Five years ago, it was worth $40 million. If Houston continues its economic recovery, it’ll be worth that soon.”
Matt was jotting notes in the Thorp file and waiting for a break in Peter’s recitation so that he could explain that he preferred that Intercorp invest in commercial buildings, when Peter added, “If you’re interested, we’d have to move quickly because both Thorp and Collins indicated they’re expecting an offer for that property at any hour. I thought they were trying to hustle me until they named names. Evidently Bancroft & Company, here in Chicago, is hot for the land, and no wonder! There’s nowhere else in Houston like it. Hell, we could grab it for twenty million and turn around in a few months and sell it to Bancroft’s for twenty-five to thirty million, which is what it’s actually worth.” Peter’s voice trailed off, because Matthew Farrell’s head had snapped up and he was staring at Peter with a very strange expression on his face.
“What did you say?” he demanded.
“I said that Bancroft & Company plans to buy the land,” Peter said, wary of that cold, calculating, ominous look in Farrell’s eyes. Thinking Farrell wanted more information, he added quickly, “Bancroft’s is like Bloomingdale’s or Neiman-Marcus—old, dignified stores with a predominantly upper-class clientele. They’ve begun expanding into—”
“I’m familiar with Bancroft’s,” Matt said tightly. His gaze shifted to the file on Thorp and he studied the appraisal on the Houston land with heightened interest. He saw the figures on the appraisal documents, and he realized the land was a bargain with a huge potential for profit. But profit wasn’t on his mind right now. With renewed anger, he was thinking of Meredith’s actions Saturday night.
“Buy it,” he said softly.
“But don’t you want to hear about some of the other properties?”
“I’m not interested in anything except the piece of property that Bancroft’s wants. Tell legal to draw up an offer, contingent on our own appraiser agreeing with Thorp’s appraiser on the value of the land. Take it to Houston tomorrow and present it to Thorp yourself.”
“An offer?” Peter almost stammered. “For how much?”
“Offer fifteen million, and give them twenty-four hours to sign the contract or we’ll walk. They’ll counter immediately with twenty-five. Settle at twenty, and tell them we want ownership of the property within three weeks or the deal is off.”
“I really don’t think—”
“There’s another contingency. If Thorp accepts our offer, they are to keep the entire transaction completely confidential. No one is to know we’re buying that land until after the sale is consummated. Tell legal to include all that in the contract, along with the other usual contingencies.”
Suddenly Peter felt uneasy. In the past, when Farrell had invested in or bought companies Peter had recommended, he hadn’t done it on Peter’s recommendations alone. Far from it. He’d checked things out himself and taken precautions. This time, however, if something went wrong, Peter would be solely and entirely held to blame. “Mr. Farrell, I really don’t think—”
“Peter,” Matt interrupted with silky finality. “Buy the goddamned property.”
Nodding, Peter stood up, but his unease was growing by the moment.
“Phone Art Simpson in our legal department in California, give him the contingencies, and tell him I want the contracts here tomorrow. When they arrive, bring them in and we’ll discuss the next steps.”
When Vanderwild left, Matt turned in his chair and looked out the windows. Obviously, Meredith still thought of him as an inferior lowlife, beneath her contempt, which was her right to do. It was also her right to make her feelings clear to everyone who read the Chicago newspapers, which was what she’d done. However, exercising those rights was going to cost her about ten million dollars—the additional price she was going to have to pay Intercorp for the land she wanted in Houston.
20
Mr. Farrell said I was to bring these contracts to him as soon as they arrived,” Peter informed Miss Stern in an assertive tone, late the following afternoon.
“In that case,” she replied with thin gray brows raised, “I would suggest you do exactly that.”
Irritated at having lost yet another skirmish with her, Peter swung on his heel, knocked on the rosewood door of Matt Farrell’s office, and opened it. In Peter’s desperation to dissuade Farrell from acting precipitously on the Houston land, he failed to notice that Tom Anderson was at the far end of the large office, studying a painting that had just been hung on the wall. “Mr. Farrell,” Peter began, “I have to tell you that I’m extremely uneasy about this Thorp deal.”
“Do you have the contracts?”
“Yes, I do.” Reluctantly, Peter handed the contracts to him. “But will you at least listen to what I have to say?”
Farrell nodded to one of the burgundy suede chairs that made a semicircle in front of his desk. “Sit down, while I look these over, and then you can have your say.”
In nervous silence, Peter watched him reading the long, complex documents that committed Intercorp to a cash outlay of millions of dollars without a trace of expression on his face. Suddenly, Peter wondered if the man was ever susceptible to such human weaknesses as doubt or fear or regret or any other strong emotion.
In the year since Peter had joined Intercorp, he’d seen Matt Farrell decide he wanted to accomplish something; when he did, he could unta
ngle complications that had kept his staff running in circles, override any remaining obstacles, and have the deal closed in a matter of a week or two. When motivated to achieve an objective, he plowed through any obstacles in his path, human or corporate, like a deadly tornado—with awesome force and complete lack of emotion.
The other men who worked closely with Farrell as part of his “reorganization team” were better at hiding their awe and uncertainty about their employer than Peter was, but Peter sensed they felt as he did. Two nights ago they’d all worked until ten o’clock, and they’d invited Peter to join them for a late dinner. Tom Anderson had decided at the last minute to continue working. During that dinner it became obvious to Peter for the first time that not one of those four men knew Farrell much better than he himself did. Only Tom Anderson seemed to be privileged with Farrell’s trust and friendship, though no one knew how he’d earned it.
His speculations came to an abrupt end as Farrell made two changes to the contracts, initialed them, signed his name at the bottom, and slid the documents across his desk to Peter. “These are all right as amended. What’s your problem with the deal?”
“There are a couple of them, Mr. Farrell,” Peter replied, straightening in his chair and trying to recover his earlier assertive attitude. “In the first place, I have the feeling you’re going ahead with this deal because I led you to believe that we could make a quick, easy profit by reselling the land to Bancroft & Company. Yesterday, I thought that was a virtual sure thing, but I’ve spent the last day and a half researching Bancroft’s operation, going over their financial statements, and I’ve also made some phone calls to some friends of mine on Wall Street. Last I talked to someone who knows Philip and Meredith Bancroft personally—”
“And?” Farrell demanded impassively.
“And now I’m not completely confident Bancroft & Company will be financially able to buy the Houston land. Based on everything I found out, I think they’re heading for big trouble.”
“What sort of trouble?”
“It’s rather a long explanation, and I can only speculate, based on the facts and on a hunch I have.”
Instead of berating him for not getting directly to the point, which Peter half expected, Farrell said, “Go on.”
The two small words of encouragement banished Peter’s nervous uncertainty, and he became the confident, capable investment brain they’d written up in the business magazines when he was still at Harvard. “All right, here’s the overall picture: Until a few years ago, Bancroft’s had a couple of stores in the Chicago area, and the company was virtually stagnant. Their marketing techniques were antiquated, their management team relied too much on the ‘prestige’ of their name, and they, like the dinosaur, were on the road to extinction. Philip Bancroft, who’s still president, ran the stores as his father had run them—like a family dynasty that didn’t need to respond to economic trends. Then along came his daughter, Meredith. Instead of going to some finishing school and devoting herself to showing off for the society pages, she decides that she wants to take her rightful place in Bancroft’s hierarchy. She goes to college, majors in retailing, graduates summa cum laude, and gets her master’s degree—none of which thrills her father, who tries to turn her off on the idea of working for Bancroft’s by making her start at the store as a clerk in the lingerie department.”
Pausing for a moment, Peter explained, “I’m giving you all this background so that you’ll have a handle on who’s running the store—literally.”
“Go on,” Farrell said, but he sounded bored, and he picked up a report on his desk and began reading it.
“During the next few years,” Peter continued doggedly, “Miss Bancroft works her way up through the ranks and along the way she acquires a hell of a good firsthand grasp of everything involved in retailing. When she’s promoted into merchandising, she starts pushing for Bancroft’s to market its own private-label brands—a highly profitable move which they should have made long before. When that idea yields big profits, Papa shifts her into furniture merchandising which had been a losing proposition for the store. Instead of failing there, she pushes for a special ‘museum antique’ section, which gets written up in all the newspapers and brings shoppers into the store to ogle the antiques, which are on loan from museums. While they’re there, the shoppers naturally wander over to the regular furniture department, and suddenly they’re spending their furniture money at Bancroft’s instead of at the suburban furniture stores.
“Papa then makes her manager of public relations, which had been a meaningless position that involved little more than approving an occasional donation to some charity and supervising the annual Christmas pageant in the auditorium. Miss Bancroft promptly set about conceiving more annual special events to bring shoppers into the store—but not just the ordinary ones like fashion shows. She also used the family’s social connections with the symphony, the opera, the art museum, etc. For example, she got the Chicago Art Museum to move an exhibit to the store, and she talked the ballet into performing the Nutcracker during the Christmas season in the store’s auditorium. Naturally, all that caused an explosion of media coverage, which, in turn, created an escalated awareness of Bancroft & Company with Chicagoans and gave the store an even more elite image. Shoppers began coming to the store in record numbers, and her father switched her over to fashion merchandising, which was the next place she excelled. There, her success probably owed itself as much to her appearance as to any particular fashion talent. I’ve seen newspaper clippings of her and she’s not only classy, she’s stunning. Some of the European designers evidently thought so too, when she went over there to talk to them about letting Bancroft’s handle their lines. One of them who’d let only Bergdorf Goodman handle his line evidently cut a deal with her—he agreed to let Bancroft’s have it exclusively, on the condition that Miss Bancroft herself appear in his gowns. He then designed an entire collection for her to wear, which she was naturally photographed in at various society functions. The media and the public went wild when they saw her wearing his stuff, and women began to arrive in droves in Bancroft’s designer departments. The European designer’s profits soared, Bancroft’s profits soared, and several other designers jumped on the bandwagon and pulled their lines from other stores to give them to Bancroft’s.”
Farrell sent him an impatient look over the top of the report he’d been reading. “Is there a point to all this?”
“I was coming to it right now: Miss Bancroft is a merchant, like her forebears, but her special talent is actually in expansion and forward planning, and that’s what she heads now. Somehow, she managed to convince her father and Bancroft’s board of directors, who are anything but progressive, to embark on an expansion program and open stores in other cities. To finance the opening of those stores, they needed to raise hundreds of millions of dollars, which they did in the usual way—they borrowed what they could from their bank, then they took the company public and sold shares on the New York Stock Exchange.”
“What difference does all this make?” Farrell demanded shortly.
“It wouldn’t make any difference were it not for two things, Mr. Farrell: they’ve expanded so quickly that they’re in hock up to their ears, and they’ve been using most of their profits to open more stores. As a result, they don’t have a lot of cash lying around to weather any major economic reversals. Frankly, I don’t know how they intend to pay for the Houston land, or if they can. Secondly, there’s been a rash of hostile takeovers lately with one department store chain swallowing up another. If somebody wanted to take over Bancroft’s, they couldn’t afford to put up a fight and win it. They’re ripe for a takeover attempt. And,” Peter stated, deepening his voice to emphasize the importance of what he was about to say, “I think somebody else has noticed that.”
Instead of looking concerned, Peter watched an odd expression cross Farrell’s face, an expression that might have been amusement or satisfaction. “Is that right?”
Peter nodded,
slightly disconcerted by his strange reaction to what should have been alarming news. “I think somebody is already secretly starting to buy up all the shares in Bancroft’s they can get their hands on, and they’ve been buying them up in blocks small enough not to alert Bancroft’s or Wall Street or the SEC yet.” Gesturing toward the three computer screens on the credenza behind the desk, Peter said, “May I?”
Farrell nodded and Peter got up and walked over to the credenza. The first two computers processed information from all of Intercorp’s reporting divisions, and their screens were lit up with data that Farrell had evidently been looking at earlier. The third computer screen was blank, and Peter used it to key in the codes and requests that he used in his own office. An instant later, the Dow Jones average scrolled across the screen. Interrupting that display, Peter keyed in another set of requests and the screen lit up with the heading:
TRADING HISTORY: BANCROFT & COMPANY TRADING CODE B&C•NYSE•
“Look at this.” Peter pointed to the columns of data on the screen. “Until six months ago, Bancroft’s stock was pretty much where it had been for two years—selling at ten dollars a share. Until then, the average number of shares traded in a week was one hundred thousand. Now look,” he said, moving his finger down the column on the left. “In the last six months it’s been inching upward until it’s now nearly twelve dollars a share, and the volume of shares traded has been hitting new highs about once a month.”
He pressed another key, and the screen went dark, then he turned toward Farrell, frowning. “It’s just a hunch, but I think someone—some entity—may be trying to acquire control of the company.”
Matt stood up, putting an abrupt and permanent end to the discussion. “Either that, or investors simply think B&C is a good long-term investment. We’ll proceed with the purchase of the Houston property.”