He Shopped Till His Empire DroppedAmy Dunkin
GOING FOR BROKE By John Rothchild
Simon & Schuster -- 286pp -- $21
Robert Campeau is one of the more bizarre businessmen to emerge during the last decade. Here is a man who blew a big deal because, in the midst of negotiations, he took off to Brazil for a facelift. Who for five years shuttled between an official family in Ottawa and a secret one in Montreal. Who took sheep-brain injections to live longer and once faked a hole in one to win a company golf tournament.
All this would be only mildly interesting chatter had Campeau not been at the center of one of the 1980s' biggest financial disasters. Between 1986 and 1988, he charmed, cajoled, and bullied his way into buying two of the biggest department store conglomerates in the U. S. -- Allied Stores Corp. and Federated Department Stores Inc. The two companies, owners of such stores as Bloomingdale's and Brooks Brothers, had plodded along profitably for decades. Campeau drove them into bankruptcy in no time.
He had the help of Wall Street's heavy hitters, including mighty Citicorp and brash First Boston Corp. They backed him -- Before he got to Wall Street, Campeau, a mechanic's son from an Ontario mining town, had made a name in Canada as a builder of office towers and shopping malls. But he remained an outsider to Canada's business elite. After members of that club thwarted his takeover of two large Canadian trust companies, he decided to head south.
His first plan was to buy a U. S. savings and loan, but after putting Shearson Lehman on the case, he left for his facelift. When the deal collapsed, Rothchild says, he tried to renege on Shearson's $100,000 finder's fee. The incident foreshadowed later deals in which Campeau vanished at key moments and was loath to part with any of his own money.
Next, he decided to take part in the leveraged buyout of R. H. Macy & Co., but as an unknown, he didn't even get in the door to see Macy's Chairman Edward S. Finkelstein. Ironically, the two would one day meet in Finkelstein's Manhattan townhouse to divide the spoils of their bidding war for Federated. Finkelstein got some coveted Federated chainsthe cash flow, the added value, how you could sell off the parts to pay the debts . . ." But as Campeau would learn, uneven cash flows make retailers poor LBO candidates.
Even close associates at Campeau Corp. didn't take his quest seriously at first. But with "quirky bravado," Campeau enlisted the help of an impressive bunch, including First Boston's celebrated mergers and acquisitions specialist, Bruce Wasserstein. His bankers and lawyers relaxed many rules of prudent lending, going so far as to let Campeau borrow most of the $300 million in equity he needed. Even Wasserstein reached new heights of creativity: first, in arranging a $700 million bridge loan for the hostile deal, then in organizing a "Street Sweep" that allowed Campeau to buy enough stock on the open market to gain control of Allied.
Although Rothchild, also the author of A Fool and His Money, didn't interview Campeau for the book, he does an admirable job of capturing the developer's eccentric yet engaging personality and the insecurities that drove him. While maintaining a relatively narrow focus, Rothchild places the story in the context of '80s excess, likening Campeau to Donald Trump and other "Debtor Barons" who speculated with borrowed money.
After he completed the $4.1 billion acquisition, Campeau took steps to cut Allied's rs work in a softening retail climate.
But just months later, he decided to go after Federated, and the whole financial circus began again. First Boston had a new motive to swing this deal: It wanted to prove it could play the M&A game without Wasserstein, who had left. In January, 1988, before he even had financing commitments, Campeau launched a $48-a-share tender offer. Competing bidders soon drove the price to $73.50.
No way could Campeau pull it off this time, even with equity infusions from Canada's billionaire Reichmanns. Not only had he overpaid, but Morosky quit after Campeau broke a promise to make him CEO.
In less than two years, the situation blew up. Allied and Federated filed for Chapter 11 reorganization in January, 1990, leaving 50,000 creditors with $8.2 billion in claims. First Boston, which held millions in devalued Campeau junk, needed a $650 million bailout from its parent, Credit Suisse. Campeau was forced into personal bankruptcy and lost the chairmanship of Campeau Corp.
In the end, Rothchild writes, the public will pay for the Campeau-style sprees of the 1980s through higher taxes and bailouts of troubled banks. That we're finding more bargains at department stores these days is small consolation.