Maybe the dumbest deal ever
Posted
Mar 25 2008, 06:58 PM
by
Charley Blaine
Al Copeland died on Sunday. You might not know the name. In Louisiana and certainly around New Orleans, he was about as well known as anybody both for the chicken you can get at Popeyes Famous Fried Chicken, the chain he started, and for his lavish, complicated and exuberant lifestyle.
He liked getting married. But all four of his marriages ended in divorce -- often acrimoniously. He liked Christmas. His house along Lake Pontchartrain in Kenner, La., was so lit up with lights at the holidays that airline pilots would use it to line up their approaches to the airport.
He liked fast cars and fast boats. He carried on a fun feud over the decor of one of his restaurants with no less than Anne Rice, the author of "Interview with the Vampire."
In short, he was a dream subject for reporters. Check out the obits on the man in The Times-Picayune (my former employer) and The New York Times. Or check out the brawl he got into in 2001.
But, while he was pretty good at the restaurant business (You can see what he did here), Copeland also did one of the dumbest deals ever when he took over Church's Chicken in a hostile takeover fight in 1989.
My point is not to beat on Al for the deal. Rather it's to note that Wall Street makes stupid mistakes again and again and again. The subprime mortgage crisis that has caused so much stress since last summer is hardly unique.
Check the Church's Chicken deal. It wasn't the biggest deal at the time, but it was just as dumb as the deal that Canadian developer Robert Campeau did in the late 1980s to buy Federated Department stores, known today as Macy's, and then Allied Stores. And Wall Street made Copeland's deal happen.
To make the Church's deal work, the bankers (including Merrill Lynch, Wasserstein Perella and the Canadian Imperial Bank of Commerce, allegedly smart guys all) agreed to let Copeland's company borrow 150% of the $392 million purchase price. That's right: 150% of the purchase price, give or take a million bucks. Copeland didn't have to put up much money at all.
The plan was that the debt would be worked down by selling off surplus Church's restaurants. That decision probably caused every potential buyer to knock their offer for a Church's restaurant by 50% or so.
It took only a few years for the deal to blow up. Copeland's company couldn't make the debt payments. The banks declared him in default. His position seemed to be, "You lent me the money; it's your problem."
And, besides, he was about to get married at the New Orleans Museum of Art, a ceremony to which he invited hundreds. He and his wife (No. 3) left in a helicopter that sprinkled rose petals on the throng below as it lifted off.
Angered by Copeland's nuptial extravagance, the bankers forced Copeland's operating company into Chapter 11 bankruptcy. Eventually, they ended up owning it.
It's now known as ACE Enterprises with some 1,800 mostly franchised Popeyes outlets in 40 states It went public, bought the Cinnabon and Seattle Coffee and sold both and Church's when the company got into trouble. The stock went to nearly $21 in May 2007 but has fallen more than 50% since.
But Al Copeland had the last laugh. A separate company owned the recipe to the spices for the chicken and has a contract to supply the spices until 2025. Without the recipe, Popeyes wasn't Popeyes. So, the company that was taken away by Wall Street ended up paying him millions.
