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annals of communications
The New Yorker - May 22, 1995

the consigliere

There are big decisions yet to be made in the MCA-Seagram deal, and they may all involve Herbert Allen.

by ken auletta

Herbert A. Allen's official biography contains just five sentences, and they reveal almost nothing about the man. The biography says that Allen is the chief executive officer of Allen & Company, a privately held investment-banking firm; is a member of the board of directors of the Coca-Cola Company; was once chairman of the board ofColumbia Pictures; and graduated from Williams College. There is no hint that Allen has becomethe unofficial investment-banking consigliere to many of the world's communications companies. Allen calls himself "an owner" and "a buyer," and notes that, on behalf of Allen & Company, the Allen family, and the partners, he has several hundred million dollars invested in a hundred and fifty companies. "I'm not an investment banker," he says. Nevertheless, clients seek his investment advice. Last November, he was summoned to a meeting in Osaka with Yoichi Morishita, the president of the Matsushita Electric Industrial Company. In 1990, Allen represented Matsushita when it bought MCA, which is the parent of Universal Pictures, Putnam Publishing, a television company, and a record company, and in addition has an interest in theme parks. Now, having tired of the extravagant costs and the narcissism of Hollywood, Matsushita wanted Allen to help it sell MCA. What unfolded over the next five months will no doubt contribute to the Allen legend.

Allen is fifty-five but appears to be older. He has pouches under his eyes, which are deep-set and dark; his forehead is high and is topped by thin-ning, short black hair. His face looks gaunt. He is wide-shouldered and lithe, however, and laughs easily, and heconveys the impression that he is an older man inhabiting a young man's body.

Sitting across from Allen in Osaka, Morishita asked him how much MCA might bring in an outright sale, and Allen said seven to eight billion dollars. Morishita asked him to prepare what Allen calls "a menu of choices" regarding MCA. Back in the States, Allen visited MCA's executives and listened to their analysis of the business and to their complaints about dealing with Matsushita. In December, at a second meeting in Osaka, with eleven Matsushita executives present, four members of Allen's team presented a financial analysis of MCA's strengths and weaknesses--the kind of computer-generated presentation that Allen prefers not to do himself. He is not a spreadsheet specialist, not someone who is constantly taking notes. Although his clients all agree that he is smart and financially adept, when they are asked to describe histalents they usually mention not pro-fessional qualities but personal ones--candor, independence, loyalty, anda shrewd sense of people and theirmotives.

When the focus of the second Osaka meeting shifted from hard numbers to matters of judgment, Allen spoke up. The Matsushita executives said that they were puzzled by the behavior of MCA's chairman, Lew R. Wasserman, and its president, Sidney J. Sheinberg, who for months had been talking openly to the American media about their grievances against their Japanese parent, their principal complaint being that Matsushita would not allow them to buy a television network or to expand into other areas. Expressing one's grievances publicly was alien to the team-oriented Japanese management culture, and in the most indirect, polite ways the Matsushita leaders said so.

Allen's response was blunt. The Matsushita executives had just three options, he said. One, they could retain Wasserman and Sheinberg and other MCA executives and support their expansion plans; two, they could sell MCA; or, three, they could keep MCA and invest more resources but change the management. Allen said that if they chose the first or the third option they should do as Wasserman and Sheinberg wanted and invest more money to buy a broadcast network, perhaps, or expand into cable and other new media.

For weeks after the December meeting, Allen heard nothing from Osaka, but the silence was no surprise to him. Nor did it particularly bother him. Allen is a stoic, and he knew that Japanese companies tended to be secretive about their decision-making and tried to reach an internal consensus before sharing their thoughts with outsiders. By March, Matsushita had reached a consensus to sell MCA. By April, Allen had helped engineer a sale.

What was unusual about the sale was its inside nature: Without a public auction, Allen delivered MCA from one client to another. In some ways, it was the kind of inside deal that Allen criticized when Viacom's chairman, Sumner Redstone, and Paramount's chairman, Martin Davis, agreed, in 1993, to a friendly merger without an auction. Nevertheless, with the help of Michael Ovitz, the chairman of the Creative Artists Agency, who had also represented Matsushita four years ago and was an adviser in this negotiation, Allen persuaded the Japanese to sell the company to Edgar Bronfman, Jr., the president of the Seagram Company. Bronfman advanced his own cause by twice fly-ing to Osaka to have dinner with Morishita. The first of these visits was arranged by attorneys at Simpson Thacher, which had long represented Seagram and now, conveniently, was counselling Matsushita. After the second dinner, Morishita told Bronfman that he would make an exclusive arrangement to sell Seagram eighty per cent of MCA subject to price and timing. Word of the deal leaked out in late March, when Seagram raised the cash by selling its stock in E. I. DuPont de Nemours & Company for nine billion dollars. And when word did get out, a friend of Bronfman's says, "a long, juicy list of those interested in MCA" materialized, including Ronald Perelman's New World Communications and the German-based media conglomerate Bertelsmann.

By then, however, Allen and Ovitz--along with Seagram's traditional investment-banking firm, Goldman, Sachs, which, like Seagram's usual outside counsel, Simpson Thacher, was this time representing Matsushita--had locked up the deal for Seagram. There would be no bidding war. "All our regular advisers were on the other side," Edgar Bronfman, Jr., says. "I hope that was helpful." According to Allen, the major credit for putting the deal together for Bronfman belongs to the attorneys at Simpson Thacher. In corporate boardrooms, however, Allen is thought of as the architect of the deal. When it comes to Hollywood and invest-ment banking, "all roads lead through Herbert," says Brian Roberts, who is the president of Comcast, the na-tion's fourth-largest cable-television company.

Now that Bronfman owns MCA,he has at least three major decisionsto make--all of which could involve Allen. First, he must decide on an executive to run MCA--a decision in which Allen may play a pivotal role. Sources close to Bronfman say that he is talking to others but that his first choice is Ovitz, who is a friend of both Bronfman's and Allen's. Someone familiar with the situation says, "Bronfman has talked to him about the job." Ovitz might be able to bring with him the consortium of three telephone companies that he has helped organize to provide video on demand; the consortium could give MCA more of a presence in new media. Ovitz, a friend says, has grown tired of the constant hand-holding and selling required of an agent, even one with his power. But before Ovitz would leave Creative Artists, a company he built and from which he is reported to receive thirty-five million dollars annually, he would want to net about two hundred million dollars from the sale of his stake in it, and from his entry into MCA he would want a promise of "reasonable autonomy" and other assurances, an Ovitz intimate says. And one man he would rely on for counsel is Herbert Allen.

Second, Bronfman must decide whether to sell Seagram's fifteen-per-cent stake in Time Warner, which is worth two billion dollars, and which Allen helped Bronfman buy last year. Within the investment-banking community, one hears mild derision over speculation that Bronfman and Allen, as soon as the MCA sale was set,did not exercise Seagram's leverage on Time Warner, the world's largest communications company, to extract a steep exit price. This is what the investorKirk Kerkorian may be trying to doby threatening a takeover of Chrysler. The practice is called "greenmail," and Allen considers it a form of extortion. Still, there are Allen clients--NBC, which is owned by General Electric, and perhaps two or three others--who might like to be partners with Time Warner.

Finally, the road for Seagram to acquire or become partners with a TV network could pass through Allen. Seagram needs a network for the same reason that Twentieth Century Fox, Warner Bros., and Paramount started their own networks: studios want a guaranteed distribution system for their television-production factories. At the moment, however, Bronfman is not thinking about a network. "I have nothing on my plate but understanding MCA," he says. "This is a big enough bite for us. Once we understand the business, there will be a whole lot of opportunities for growing." When Bronfman is ready to make another move, Allen has a client--NBC, again--that is searching for a global partner.

ALLEN owns nearly forty per cent of Allen & Company, his family owns thirty-five per cent more, and fifteen directors own the rest. Associates estimate Allen's private fortune to be a billion dollars--a sum that helps account for his independence. His firm employs a hundred and sixty people and occupies two floors of a building on Fifth Avenue in the Fifties. Allen hasa modest office whose windows overlook Fifth Avenue, and which contains only a desk with a brown leather desk chair, a beige couch, two blue suede armchairs, and a third blue chair opposite the desk. Allen says that when he is not in the middle of a big deal hisinvestment-banking duties consume about twenty per cent of his time. The remainder, he says, is taken up with managing the firm and investing its capital.

"Herbert's life wouldn't make a commercial movie," says the movie pro-ducer Ray Stark, who is seventy-nine, and has been one of Allen's best friends for nearly three decades. "He doesn't blow up. He is not an exciting person for the screen, because he's not volatile." Allen is intensely private. He has rarely been written about, and once explained this reluctance by telling me, "I don't need the kindness of strangers." He is set in his ways. He does not smoke or drink or tell dirty jokes. He detests modern art, but loves American Impressionists, and he collects their work. He does not listen to jazz, or to music that has no recognizable melody. He hates all rock and roll, and is partialto Frank Sinatra and Broadway musicals of another era. Twice divorced, he does have a woman in his life--Gail Holmes, a Denver real-estate executive--but they are together only about ten days a month. He enjoys solitude, and lives alone, except for four dogs, at the Carlyle Hotel. He rises early and walks to his office, about a mile away, arriving before seven. Most mornings, soon after he arrives at his desk he speaks on the phone with Bronx Administrative Judge Burton Roberts, who has been a friend for three decades. Twenty years ago, Allen introduced Roberts to his friend Tom Wolfe, and Wolfe used him as the model for the judge in "The Bonfire of the Vanities." The call to Roberts is usually the first of more than a hundred calls. Daily, Allen speaks with his sister, Susan; with Ray Stark; and with Michael Ovitz; he is regularly in touch with other friends, including the NBC anchor Tom Brokaw; a San Francisco bar owner named Ed Moose; a Washington lobbyist, Mike Berman; and ten or so friends from Williams College.

Around six, Allen walks from his office to either Bravo Gianni or Gabriel's for dinner. When he dines alone, as he does one or two nights a week, he likes to read a book of nonfiction. At Bravo Gianni, he is often the restaurant's first customer. He always sits at the same table, next to a wall, orders a bottle of the same expensive Italian red wine, and drinks one glass, two at the most, with dinner. Then he walks home and tries to get to bed by ten. Friends who want to spend time with him are expected to adjust to his habits. "He's the most eccentric person I know," Michael Ovitz says. Ovitz recalled a weekend that his family spent at a ranch Allen owns, in Cody, Wyoming. Dinner was planned for six o'clock. "I made the mistake of being fifteen minutes late, since I was on the phone--unlike him, I have to earn a living," Ovitz says. "When I arrived, he and my entire family were into their second course. He had my courses stacked up like planes in a holding pattern at Kennedy. Herbert said, 'You're late.' "

In addition to the ranch at Cody, Allen has a mansion in Southampton that his four grown children use but he hasn't visited in two years, a hilltop farm in Williamstown, Massachusetts, and several condominiums in Sun Valley, Idaho, where for the past dozen years or so he has held an annual weeklong retreat for leaders in the business community and their families. Allen has represented many of those who attend, including John Malone, who is the C.E.O. of Tele-Communications, Inc., the world's largest cable company; Rupert Murdoch, the C.E.O. of the News Corporation; Barry Diller, the entertainment executive, who recently sold his stake in QVC; Edgar Bronfman, Jr.; Robert Wright, the president of NBC; two DreamWorks SKG co-founders, David Geffen and Jeffrey Katzenberg; Viacom's chairman, Sumner Redstone, whom he helped acquire Viacom in 1987 and for whom he (and Stanley Shuman, a partner in his firm) sold Madison Square Garden last year; and Coca-Cola's C.E.O., Roberto C. Goizueta, to whom he sold Columbia Pictures in 1982. (With Allen's assistance, Coke sold it to Sony in 1989.) Allen always arranges for a photographer to take pictures of the guests at the Sun Valley retreat, and each day a new set of pictures is framed and hung on the walls--of the investor Warren Buffett fishing, for instance, or of Microsoft's Bill Gates and Disney's Michael Eisner hiking. Allen is always urging friends and clients to take time off and go on safari with their children, for example, as he has. With a hint of envy, Michael Ovitz observes that Allen has achieved an ideal balance between business and leisure. "He has it all figured out," Ovitz says.

IN terms of fees earned or number of deals made, Allen is not the most productive investment banker in the communications world--that distinction probably belongs to Steven Rattner, the head of Lazard Freres & Company's communications group--but he has certainly been involved in some of the largest media deals. "He is one of the few people in the financial com-munity who fit into that world," Fe-lix Rohatyn, of Lazard Freres, saysof Allen. "He's more them than us." Murdoch, who has relied on Allen & Company's Stan Shuman for twenty years but also talks regularly with Al-len, says, "They are the Hollywood investment bank of choice." Viacom's C.E.O., Frank Biondi, says, "He'sthe functional equivalent of a rainmaker."

Allen's influence stems not only from understanding of and experience in the entertainment business but also from long relationships with people in the business and years of giving solid advice. Associates describe doing business with Allen in metaphysical terms. Jeffrey Katzenberg says, "Why do we choose one doctor over another? We don't know what they know. What we do know is how they make us feel. Herbert makes you feel com-fortable and confident. He's never pushing." Warren Buf-fett, who, like Allen, is a director of Coca-Cola, says of him, "He has none of the bombast and fad-of-the-month that you run intoin the investment-banking world. It's a quiet self-confidence--but not a self-important style--that inspires confidence."

One reason clients feel comfortable with Allen is that in a business of salesmen he always behaves like a buyer. In part, this is because Allen & Company, unlike most investment banks, puts up its own money to sup-port deals. "We own all or part of a hundred and fifty companies," Allen says. Most of the company's income--sixty per cent,he says--derives not from fees but from investments: "We are a buyer. Mostof our business is buying. The essenceof our business is ownership. Wedon't think like agents. We think like principals."

Allen has more money than many of his clients, and his wealth allows him to behave like a benefactor. He always picks up the tab at a restaurant. When friends or clients want to get away, Allen insists that they use one of his houses, and provides a full staff. When Katzenberg was thinking about leaving Walt Disney Studios, and again after he left, when he was thinking about what to do next, he sought Allen's counsel. When Michael Ovitz, several years ago, wanted to better understand investment banking, he sought out Allen as a tutor. When Senator Bill Bradley, of New Jersey, who has counted Allen a friend for more than twenty years, wants disinterested advice, he seeks out Allen. Bradley says he trusts Allen, because "he'll always keep a confidence, and he'll never talk about other people to me."

With clients, Allen can be blunt, as he was with Matsushita. Edgar Bronfman, Jr., says that candor is the quality in Allen that most impresses him. "He tells you what he believes, whether you hear it or not," Bronfman says. One witness recalls that when Bronfman was acquiring his stake in Time Warner, and Time Warner's C.E.O., Gerald Levin, refused to invite him to jointhe board and refused to solicit his advice, Allen was a hawk. Get tough with Levin, he advised. Other Bronfmanadvisers were pushing conciliation,but Allen told him to insist on a board seat and to urge the sale of some Time Warner assets to reduce the corporation's debt. Bronfman recalls Allen'sadvice: " 'You need to decide whatyou want out of Time Warner. You've been patient enough. Now your patience is looking like weakness.' " Bronfman sided with the doves, and Levin succeeded in blocking Seagram--one reason that Bronfman decided to court MCA.

Contributing to Allen's allure isthe way he treats fees. "It's your call," he often tells clients when they ask about the fee. Rupert Murdoch says, "He gives you the feeling he's almost doing it for fun--and he is." In 1993, when Robert Greenhill, of Smith Barney, helped bring together Sumner Redstone, of Viacom, and Paramount's chairman, Martin Davis, Redstonesent Allen and Alan (Ace) Greenberg, of Bear, Stearns, each a check for a million dollars. Redstone said it was for past services, since both Allen and Greenberg had tried over the past several years to bring the two companies together. Greenberg kept his check,but Allen thought that Redstone was attempting to keep him on the side-lines in what would become a contest for the control of Paramount, so he sent his check back with a note saying he had done nothing to earn it. (Redstone was not amused, particularly when,just days later, it became known that Allen was representing Barry Diller, the president of QVC, who also was in-terested in buying Paramount. A year later, however, Redstone hired Al-len & Company to sell Madison Square Garden.)

Allen refused another, even bigger check when the battle for Paramount ended. Diller says that in early 1994, after QVC lost to Viacom, he wanted to pay Allen a fee "well in excess of a million dollars" for Allen & Company's effort. On at least three separate occasions, Allen declined. Diller finally sent along a check for more than a million dollars to cover expenses. He recalls that Allen sent it back with a letter saying, "I committed to do this. I will not cost the shareholders of QVC a nickel." (Of course, Allen & Company made up for the loss when Diller paid it a fee of ten million dollars to sell his stake in QVC.)

Some people feel that such acts border on the cavalier. "You can't pay the rent giving checks back," says Hans W. Kertess, a director of Salomon Brothers, who is a boyhood friend of Allen's and was the best man at his first wed-ding. Still, Allen's apparent largessehas become both a source of loyaltyand a powerful marketing tool. "There is no transaction that I'm involved in that he will not be a part of," Dillerdeclares.

ACTING like a buyer is no doubt easy for one who is born into wealth. The firm that serves as Allen's power base was started by his uncle, Charles, and his father seven decades ago. Charles Allen was a high-school dropout who became a Wall Street runner and, in 1919, with his younger brother, Herbert, who was also a high-school dropout, began investing in stocks. Their initial capital was supplied by Charles's first wife. From about 1922 on, the brothers deliberately stood apart from much of Wall Street, and by 1940 they were merchant bankers, relying not on fees to make money but on their own investment convictions. Allen says that his father, who is now eighty-seven and ailing, and his uncle, who died last year, "made a great partnership, in that they complemented each other's weaknesses." It was, however, a partnership of only two partners, and the company was a far less collegial place than it is today.

Herbert spent a good part of his childhood in the leafy Westchester suburb of Irvington. His father's mother "was Jewish--we think," Allen says.His father became a nonpracticingUnitarian--an agnostic, that is. Herbert's mother was an Irish Catholic,and she had her daughter and herson baptized in the church, but, like his father, Herbert abhorred the structure and the discipline of formal religion. "It's like digging potatoes," he says. "You can do it one day and then you get the idea."

Herbert attended the Hackley School, in nearby Tarrytown, boarding there in his junior and senior years. He had good grades, excelled in football, basketball, and baseball, and served asclass president and student-body president. He had a lot of friends, but rarely talked about his family or his feel-ings. "Herbert was always tremendously private," says Hans Kertess, who lived two doors away in Irvington. Phil Havens, who taught Allen history andEnglish and coached him on foot-ball and baseball teams, remembers Allen as having been mature beyond his years. Havens had never coached baseball, and he came to rely on Allen,who played shortstop, as an assistant coach. "He was calm and cool and self-possessed," Havens recalls. "Often fifteen-year-olds are scattered all over the lot, and struggling with who they are. He didn't struggle. He knew who he was."

In 1958, Allen enrolled in Williams College, where, although he was generally popular, he remained very self-contained. Francis T. (Fay) Vincent, who went on to become an attorney, chairman of Columbia Pictures, and then baseball commissioner, and is now an investment adviser, was a college adviser to Allen when he was a junior and Allen was a freshman. "He was very much the way he is now," Vincent says. "He seemed mature, and totally apart from the concerns most of us had."

Allen graduated from Williams in 1962, and in June of that year he married Laura Parrish, the daughter of a prominent Oklahoma City doctor, who had just completed her sophomore year at Smith. (Within nine years, theyhad four children--two girls and two boys--but in 1971 they were divorced.) It was also in 1962 that Allen joined his father's firm, which was then on Broad Street. In 1966, at the age of twenty-six, he became president of Allen & Company.

ALLEN met Ray Stark some thirty years ago. It was a fateful meeting. In 1957, Stark, after abandoning a successful career as a Hollywood agent, became a Hollywood producer, bringing to the screen such hits as "Funny Girl" and "The Way We Were." Stark has also had his share of critical flops. Most of his movies, good or bad, were made for Columbia Pictures, and in the early seventies he accepted stock in the studio, which was floundering, as payment for five million dollars he was owed. In 1973, Columbia's stock dropped to two dollars a share, and Stark bought more. He went to see Allen, to talk him into buying some. Stark needed an investor to reinvigorate Columbia (and his holdings), and he urged Allen to meet the people at Columbia. The more Stark talked about Columbia, the more interested Allen became. Against the advice of his father and his uncle, he decided to acquire the stock.

Allen got more deeply involved with Columbia than he had expected to, and in 1981, by which time he owned 6.7 per cent of the stock, he became chairman of its board. Along the way, hehad invited more than a few of his friends to join the board, including former Vice-President Walter Mondale; Dwayne Andreas, the chairman and C.E.O. of Archer-Daniels-Midland; Robert Strauss, the former Democrat-ic National Committee chairman; and Dan Lufkin, a founder of the Wall Street firm of Donaldson, Lufkin & Jenrette. To run Columbia over all, he recruited a friend, Alan Hirschfield. To run the studio, he hired David Begelman, Barbra Streisand's agent, whom Ray Stark had recommended. The studio made a comeback, and Stark and Allen became close. Stark introduced Allen to the powers of Hollywood, and he introduced him to the pleasures of Sun Valley. Allen and Stark were incongruous friends: one brassy, the other private; one a shameless self-promoter, whose official six-page biography boasts of his "unique personality," the other so modest that in 1979, when he was dating the actress Ann Reinking, he did not tell her that he had tackled a robber on Madison Avenue, wrestled the gun away, and held the man down until the police arrived. Reinking, who later became Allen's second wife, read about it in the New York Post. "If Herbert were a girl, I'd marry him," Stark says. "He's the perfect kind of companion."

Life at Columbia was not all glamour. In September of 1977, Allen learned that David Begelman had forged signatures on three studio checks worth a total of forty thousand dollars. Hirschfield wanted to fire Begelman immediately. Stark wanted to give Begelman, a friend, a chance to explain. Allen sided with Stark.

At first, Columbia executives quietly turned the matter over to the Securities and Exchange Commission and the Los Angeles District Attorney's Office,but when the publicity continued the board stripped Begelman of his titles and his options and removed him from the board. Allen and Stark were annoyed; they continued to consult Begel-man, and in December Hirschfield tried to placate them by reinstating him as the head of the studio, only to easehim out again in February of 1978. In David McClintick's best-selling book "Indecent Exposure" Allen was portrayed as a cynic. Friends felt that he was just being loyal. To this day, Allen expresses no regret. He refuses to think of Begelman's act as thievery, saying that he had had a mental breakdown. He attributes the furor to a "post-Watergate morality," and says of the matter, "Given the morality of the day, and the uproar in the press, it was unrealistic to think he could be reinstated." There was one other casualty of this sorry affair: Alan Hirschfield. Before 1978 ended, Allen had replaced him with Fay Vincent, who was then a lawyer with the S.E.C.

In 1981, Donald Keough, the president of Coca-Cola and its No. 2, visited Allen. Domestic sales of Coke had reached a plateau, Keough told him; the company was looking for ways to shore up domestic earnings and would be interested in acquiring Columbia if it was available. Keough recalls being stunned when Allen, instead of trying to sell him on the value of Columbia, warned him that the entertainment business contained unwelcome surprises, insufferable egos, and uninvited publicity, and that entering the field might mean Coca-Cola's wholesome name would be tarnished. "He raised a lot of objections that he thought we might like to consider," says Keough, who soon became a close friend of Allen's. "He was like Aquinas. It was sort of symbolic of Herbert." Despite Allen's warnings, Coca-Cola wanted to buy, and in March of 1982 Allen sold Columbia for seventy-two dollars a share, or nearly thirty dollars a share more than its stock price. Since Allen had paid roughly three dollars a share for the stock a decade before, the deal was a dream for him. Allen converted most of his Columbia holdings into Coca-Cola stock.

Keough and Coca-Cola's C.E.O., Roberto Goizueta, were so taken with Allen that they asked him to join their board. At first, he declined, but then, after Fay Vincent pleaded with him, he relented, agreeing to become a Coca-Cola director for one year to smooth the transition and to try to protect his people. Allen ended up controlling close to five million shares of Coca-Cola stock. Today, Allen calculates, each three dollars he paid for Columbia stock is worth about sixteen hundred dollars in Coca-Cola stock and dividends. But if he was prescient about the long-term value of Coke, he was dead wrong about the long-term prospects of Columbia under Coca-Cola. When the sale was consummated, in 1982, Allen was talking enthusiastically about synergies--much as Sony and Matsushita would do nearly a decade later, when they acquired studios. To Laura Landro, of the Wall Street Journal, Allen predicted, "Columbia will be the General Motors of the movie business."

Allen describes Columbia as the most thrilling experience of his business life, and says of Coca-Cola, "I think Roberto Goizueta is the best chief executive officer of the best company selling the best product in the world." Allen, who drinks Sprite, now serves on the Coca-Cola finance committee and its executive committee. He is also chairman of the compensation committee, which makes recommendations about salaries and bonuses for Coca-Cola's executives, who on oneoccasion awarded him a ten-million-dollar underwriting fee.

It was shortly after Allen sold Columbia to Coca-Cola that he launched his annual retreat at Sun Valley for corporate leaders and their families. Many of those who attend this conference seek Allen's advice not just about business but about things like where to go on safari. "Suddenly Herbert is a chic guy people respect," observes the actress Candice Bergen, a longtime friend of Allen's. "People who used to sneer at him for having dinner at six-fifteen now line up. I feel like Louis Jourdan in 'Gigi,' where suddenly I look at Herbert and I think, My God! He's grown up and become a great man. The Gary Cooper of high finance. Yet he has never changed."

ALLEN'S firm has changed. It used to earn most of its income from investments, but now the fee side is growing faster, Allen says. Most of the traditional fee business comes from the communications sector. The firm remains small, however--just the hundred and sixty employees--"and we're not going to grow," says Paul Gould, who is the head of the arbitrage department. The firm employs no analysts and has no research department. The fifteen managing directors make less in salary than their secretaries, Allen says. Stan Shuman, who has been at Allen & Company for thirty-four years, saysthat last year his salary was twenty-six thousand dollars. This year, it was raised to thirty-five thousand, he says, so he could "qualify for maximum pension benefits." The directors are paid approximately thirty per cent of theinvestment-banking fees they bring in. They are expected to invest in companies that become clients, so that the interests of banker and client are aligned. Profits become part of the firm's capital, and as shareholders the fifteen directors get a part of this reward. If one partner advises another on a deal, he may share in the ensuing fee. Each director has both his own franchise and the muscle of Allen & Company behind him.

One danger in such a fiercely entrepreneurial company is a lack of teamwork. Allen & Company has its internal feuds, its whispered asides about what a "name-dropper" this director is or how "lazy" that one is. To improve communication and lessen such friction, Allen has lunch with the directors each Wednesday. "It doesn't mean anything--it just keeps people from killing each other," Allen says, in his flip way. Shuman says, "The firm works because of the ecumenism of Herbert." Allen is the arbiter of differences, the benefactor. Partners praise him for delegating and for not second-guessing them.

Allen has weaknesses as an investment banker. A Wall Street figure who admires him says, "If you said to me 'Who are the great corporate investment bankers?' I wouldn't say Herb Allen. I'd say Robert Greenhill or Bruce Wasserstein, but not Herbert." Stan Shuman says of his boss, "He knows relatively little finance." But he adds, "His strength comes from the fact that he has complete and maximum independence, and his judgment is unfettered by the fact that he has to get a deal done to support the organization."

Allen & Company does have some respected front-line bankers, but the consensus among both clients and competitors is that the firm lacks the depth and the full range of services provided by larger banks. As the fee side of its business rises, its weaknesses in selling itself, in making presentations, may become more pronounced. "Allen & Company is really not a firm," a rival observes. "It's a group of entrepreneurs who work on their own deals." In the fee-business world of investment banking, Allen & Company is said to be better at relationships than at providing clients with armies of bankers. One client asks, "Can Allen really put together a complicated situation, or is he only an adviser for deals that would get done anyway?" Allen's talents, this client says, are "much more qualitative than quantitative."

Both Barry Diller and Martin Lipton, of the law firm of Wachtell, Lipton, Rosen & Katz, who worked with Allen on behalf of Diller and QVC, make this point admiringly. "His talent is absolutely superb judgment," Lipton says. "He has an instinct for doing the right thing at the right moment. In the QVC bid for Paramount, his timing advice was impeccable: when we should move forward with a 'bear-hug' letter"--the original September, 1993, QVC offer--"then when we should switch to a hostile tender offer. He had what I would call a perfect feel for the general market reaction of the holders of QVC." For Diller to succeed, it was important that the share price of his company not drop, and Lipton believes that Allen's feel for how the market would respond to their moves was perfect.

In the battle for Paramount, Diller says, Allen told him at a crucial point, " 'Don't listen to anybody. Listen to yourself. Go walk around the block and come back and tell us your decision.' " What Allen understood, Diller says, was that economic decisions were rooted not just in numbers but also in instinct. "I needed that," Diller says. Because Diller was unwilling to exceed an arbitrary ceiling he had set as the price he would pay, Sumner Redstone and Viacom ended up owning Paramount.

Although Allen lost that battle, he once again demonstrated that his interests were synonymous with his client's. Because he does not need to struggle for fees, smallness becomes an Allen & Company advantage, as well as a potential pitfall. "We have no debt and two hundred million dollars in capital," Allen says. "If there were zero business, with our overhead we can live ten years as a company. Most firms don't have time to develop relationships. You need capital to invest time in relationships." Deep pockets free Allen to behave like a buyer, to indulge his ironic, relaxed view of business and life. It is a posture that attracts clients.

FRIENDS say that to better under- stand Allen one must visit him at his house in Williamstown. "It's the most beautiful log cabin you've ever seen," says Stark, who is a frequent visitor. The house sits on top of a hill, providing a commanding view of Allen's land--three hundred and fifty acres, with the Berkshires in the distance. A lawn and grazing land slope down from the main house past a small lake to a bright-red barn, where Allen keeps six horses. About a quarter of a mile away is a two-bedroom guesthouse. In Sun Valley, Cody, and Southampton, Allen bought existing houses, but in Williamstown he bought the property, in 1982, and two years ago he built his own house. He drew sketches of the house he wanted--it contains thirty-seven hundred square feet--and gave them to an architect. The house was constructed of huge red-pine logs from Michigan, and has a large combinedliving-and-dining room with a floor-to-ceiling stone fireplace at either end. The walls are adorned with photographs that Allen has taken of the changing seasons, and with the heads and the skins of animals that his sons shot in Africa--leopards, lions, sable antelope, cape buffalo--and a kudu Allen shot. There are two large bedrooms--one upstairs, where he sleeps, and one downstairs--each with its own fifty-inch television. What if he remarried and his wife found the house too masculine? "If so, she better marry someone else," he says. "I don't believe people in their fifties should make major compromises as far as romance. That you should do in your twenties."

This harsh proclamation seems to clash with the sentimentality evident in the main room. Family photographs are everywhere. There are also many pictures of Ray Stark--on horseback, in the woods, sitting on a stone wall with Allen's father and stepmother. "Ray is a type of father figure," Dan Lufkin explains. "Ray has the same sense of humor, the same devil-may-care attitude as Allen." Some people are puzzled by the relationship between the two men. Candice Bergen says, "Ray is what Herbert never had. He's openly affectionate. He's bawdy. He has given Herbert a Jewish center he never had." Allen speaks of Stark as a "total guide to me in the entertainment business," and adds, "Everything we've done in the communications business comes off Ray Stark."

Friends speak of Allen's cynicism, his jaundiced view of the motives of others. But he is rarely cynical about friends,as a visit to Williamstown suggests. He is just two miles from the college heattended, where he helped build anathletic center. Even after the primary fund-raiser for the center, John A. Kroh, Jr., was convicted of fraud, Allen insisted on putting his former classmate's name on a plaque by the front door.

Much as Allen loves his place in Williamstown, he has never spent more than three consecutive days there. He keeps moving. "I'm a hedonist," Allen says. "A person who does what he wants is a hedonist." Some friends wonder about the truth of such remarks. "There's a certain gypsylike quality in him that makes me wonder, Is he having a good time?" Hans Kertess says. "He does a lot of things. They're fascinating and exciting. I hope he's getting a lot of pleasure out of them. I'm not entirely sure he does. There's too much motion."

ON Sunday, April 9th, the sale of MCA to Seagram was announced from the law offices of Shearman & Sterling, in downtown Los Angeles. Seagram and Matsushita photographers darted about the conference room, on the twenty-first floor, snapping the principals as they signed documents and lifted champagne glasses. In the middle, at one side of a twenty-foot conference table, sat Matsushita's president, Yoichi Morishita, flanked by aides. Across from him sat Edgar Bronfman, Jr., and his father, Edgar, Sr., who is Seagram's chairman. Although Ovitz served as Matsushita's counsellor, he strode to a seat to the right of Bronfman, Sr., facing his clients. Allen had flown in from his Cody ranch and was wearing cowboy boots, and had flung a blazer over a shirt and tie that he had hastily purchased for the occasion. Instead of taking a seat next to the younger Bronfman, as he was urged to, or smilingfor a photographer, Allen stood offin a corner, acting like a buyer. "It seemed like the most comfortable place," he said later. "Get out of the way and move on." (c)

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