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A Dealmaker’s Rare Misdeal - Washington Was Wild Card In Flowers’s Bid For Sallie Mae
Washington Post, The (DC) - Friday, October 12, 2007
Author: Thomas Heath and David Cho, Washington Post Staff Writers
J. Christopher Flowers, whose bid to buy Sallie Mae has deteriorated into a bitter legal battle, has a resume that ranks him with Wall Street’s savviest dealmakers: coolly calculating architect of one of private equity’s most profitable buyouts. Goldman Sachs partner at 30. Owner of a $53 million home on Manhattan’s Upper East Side. Manager of New Jersey Gov. Jon S. Corzine ‘s personal fortune. Net worth of $2 billion.

But he has been largely unknown outside business circles during the eight years he’s spent quietly building a financial services empire. Now Flowers, 49, has been drawn into the glare of publicity because of an apparent misstep: He bid more for Sallie Mae than he now says it’s worth.

The dust-up with the Reston student lender, formally known as SLM Corp., has interrupted the charmed run of this “hard-core capitalist,” as a college friend describes Flowers. And it has forced the bespectacled Flowers, who speaks Greek and Latin and prefers chess and the piano to golf and cigars, into a political arena more familiar to his opponent — SLM Chairman Albert L. Lord, a Washington insider and veteran business infighter.

Since Flowers pulled his $60-a-share offer off the table last month, dropping it to $50, Lord has played hardball. He rebuffed the revised bid and has gone to court to force Flowers and his partners, including Bank of America and J.P. Morgan, to pay a $900 million breakup fee. Lord went public yesterday, defying Flowers in an interview and an investors’ conference call.

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Meanwhile, dealmaking doesn’t stop: Even as Flowers is fighting Sallie Mae in Delaware Chancery Court, he’s making a $30.6 billion play for Northern Rock, a British bank that nearly went under last month.

The son of a Harvard Business School administrator, Flowers went to Harvard to study applied mathematics as an undergraduate. He skipped business school, diving right in with Goldman.

There, he quickly made a name for himself, not only for succeeding without the requisite master’s degree, but also for the speed with which he became the head of the division that buys financial firms. He also became a protege and close friend of Corzine , who was chairman of the company before being purged in 1999.

Although Flowers is widely credited with helping to structure Goldman’s initial public offering that year, he had already seen a ceiling on his career there and decided to launch out on his own in 1998.

“I was on the losing side of a powerful struggle at Goldman. I was aligned with Corzine ,” Flowers said. “I realized I had gone as far as I was going to go, and it was time to move on.”

Flowers was no less successful after leaving Goldman, buying banks and other financial firms in Germany, Japan, the Netherlands and the United States.

Private equity tends to avoid the technical and regulatory complexities of buying financial firms. And since banks are already loaded with debt, it’s difficult to swing profitable leveraged deals. But where others saw risk, Flowers found opportunity.

His big breakthrough came in 2000 when he led a group of investors to put up $1 billion to buy Long-Term Credit Bank of Japan, later renamed Shinsei. The takeover and turnaround at the bank, which Flowers brought public in 2004, is not only considered the most profitable private-equity deal in history — investors saw their money multiply sevenfold, while Flowers’s personal stake multiplied 13 times — but it also became a model for the entire Japanese financial system. He is still Shinsei’s largest shareholder.

“He set the gold standard with his investment in Shinsei, one of the greatest buyouts ever done,” said David Rubenstein, co-founder of the Carlyle Group, based in the District. Corzine called the deal “the defining transaction in Chris’s life.”

The next year, he founded his own private-equity fund. Today, his J. C. Flowers II fund manages $7 billion, including $200 million of Flowers’s money.

Rick Schifter, a partner with TPG Capital, based in Texas, said Flowers’s success is due partly to his involvement in details. He recalled Flowers shuttling from room to room during one negotiation in a Manhattan office tower a couple of years ago. With only a stack of papers in front of him, Flowers was orchestrating the financing of the business, lining up who would run the company while calculating how much the firm was worth.

“He can almost be a one-man band, capable of implementing all aspects of a transaction,” Schifter said. “He doesn’t feel he needs to turn to a close number two and get advice. You could say it means he’s a bit of a loner.”

Rodgin Cohen, a managing partner at the New York law firm Sullivan & Cromwell, said another Flowers asset is his cool head. “He gets upset less than almost anybody I know at that level,” Cohen said. “He’s somebody who’s not going to let emotion or concerns about prestige bother him.”

Fannie Mae chief executive Daniel H. Mudd, who worked on the Shinsei bank deal when he headed GE Capital-Japan, said Flowers has been mischaracterized in some reporting on the Sallie Mae fight.

“The caricature here that this is some kind of table-pounding, saber-rattling sharpie from New York . . . was totally not my experience,” Mudd said. “This is a very rational, thoughtful, cerebral kind of guy.”

Mudd recalls a tense meeting where “we were sitting at a table in a Tokyo restaurant and the deal was coming apart nine ways from Sunday and everybody at the table had a different opinion. . . . I remember Chris sitting there, totally calm, and looking and listening to everybody. Very calmly and matter-of-factly, based on the economics and not on the emotion, he put all the comments back in the box and got the deal back on track. He knew what we had to do.”

Flowers said he is drawn to the private-equity business “first and foremost because it’s fun. But of course our business is obviously to make money, and that’s what we want to do, and that’s what our investors expect.”

He has given Harvard about $25 million, including the endowment of a professorship in honor of his parents. He and his wife, Mary White, have a charitable foundation, and one of their favorite causes is “Nets for Life,” which provides antimalarial bed nets to 16 countries.

Federal Elections Commission records show that Flowers has given $289,208 to politicians and committees of both parties. In the interview, he said he has no passion about politics, but mentioned his support for Corzine and Sen. Charles E. Schumer (D-N.Y.).

Friends and business associates say he has a wry sense of humor but is mostly all business.

“He feels life is short and let’s get down to business,” said a Harvard classmate, David Apgar. Apgar recalls the young Flowers as an early and unabashed capitalist.

“I would make the case for social democracy, and he would be making arguments for Darwinian capitalism. I would say, ‘What would you do with all that money that is our responsibility to go out and earn?’ “ said Apgar, a managing director at the Corporate Executive Board in Washington. “He would say, ‘It doesn’t matter. He who has the most at the end wins.’ “

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http://www.nytimes.com/2009/09/25/nyregion/25corzine.html?pagewanted=all

Meanwhile, Next Door, It’s Team Obama for Corzine
New York Times, The (NY) - Friday, September 25, 2009
Author: DAVID M. HALBFINGER and DAVID KOCIENIEWSKI Adam Nagourney contributed reporting.
Abstract: Pres Obama’s political team is fully engaged in getting Gov Jon S Corzine re-elected in New Jersey, which is one of only two states with gubernatorial election this year; Obama’s aides acknowledge that Corzine loss to Republican challenger Christopher J Christie would be rebuke to Obama, affecting his ability to pass major legislation and public perceptions of his party’s power; photos (M)
While President Obama’s political team seeks to nudge David A. Paterson out of the New York governorship, they are fully engaged in trying to get Gov. Jon S. Corzine re-elected here.

Every TV ad that Mr. Corzine puts on the air is being screened by the president’s team. The governor’s aides are giving daily briefings to the White House. Mr. Obama’s pollsters have taken over for Mr. Corzine ‘s polling team, and White House operatives are on the ground for everything from internal strategy sessions to obscure pep rallies with Latino supporters.

On Thursday, Valerie Jarrett, a senior adviser to Mr. Obama, promoted Mr. Corzine in meetings with Democratic women in the morning and black ministers in the afternoon.

In addition, Vice President Joseph R. Biden Jr. and a parade of cabinet secretaries are coming to the state to try to boost Mr. Corzine ‘s dismal poll numbers.

The state is one of only two nationwide holding governor’s contests this year. And Mr. Obama’s aides acknowledge that a loss in this deep-blue state would be interpreted as a rebuke of Mr. Obama, affecting his ability to pass major legislation and the public’s perceptions of his party’s power.

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