Buying Into the Big Time

By Janice M. Horowitz

Reginald Lewis had every reason to feel successful and satisfied. A graduate of Harvard Law School, he had founded the first black legal firm on Wall Street and enjoyed a six-figure income. But four years ago, at age 40, Lewis became bored with a lawyer's life. He decided to jump onto a faster track: the takeover game.

Last week that career change paid off in a spectacular fashion. Lewis struck a single deal that will transform his investment firm, TLC Group, into the largest black-owned business in the U.S. Beating out such rival bidders as Citicorp, Pillsbury and Shearson Lehman Bros., Manhattan-based TLC (stands for "The Lewis Company") signed an agreement to make a $985 million acquisition of Beatrice's International Food division, a profitable hodgepodge of 64 companies in 31 countries that manufacture everything from ice cream to sausages.

The transaction was a big-league leveraged buyout, the increasingly popular type of acquisition financed largely through borrowed funds. In this case, Lewis got the money from the high-rolling Drexel Burnham Lambert investment firm. When the takeover is completed, TLC is expected to rake in $2 billion in annual revenues -- far more than the $173.5 million reported last year by Johnson Publishing (Ebony magazine), which topped Black Enterprise magazine's list of the largest black-owned companies. Says Lewis of his new stature: "I like to stretch myself. I like to face challenges."

Lewis first got Wall Street's attention in 1984, when TLC snapped up Manhattan's McCall Pattern Co. with only $1 million in cash and $24 million in borrowed funds. He immediately set out to revitalize the 117-year-old sewing- pattern company. "We emphasized quality, cost containment and cash flow, and we made money," says Lewis. Indeed, McCall's earnings more than doubled last year, to $4.9 million. In July Lewis dazzled the financial community by selling McCall to the John Crowther Group, a British textilemaker. The buyer paid $63 million and agreed to assume $32 million in debts owed by McCall. For TLC, the deal meant a phenomenal 80-to-1 return on its initial $1 million investment.

The TLC chairman feels uncomfortable with being portrayed as a pinstripe Jackie Robinson. Says Lewis: "It is wrong to focus on being the first black to do something." He and his three brothers and two sisters were raised in a middle-class household in Baltimore, where Lewis attended a Roman Catholic elementary school and then became a star quarterback at Dunbar High School. "He put a lot of time into his studies. He didn't goof off," says his mother, Carolyn Fugett, who divorced his father and married Jean Fugett, an elementary school teacher, when Lewis was nine years old. Though he does not readily talk about it, Lewis must have been exposed to a strong sense of black pride early on. As a ten-year-old paper boy, Lewis delivered the Afro-American in surrounding neighborhoods. Later he attended Virginia State College, a black school.

Even as a paper boy, Lewis showed signs of managerial talent. Rather than give up his delivery route while he was away at summer camp, the youngster turned over the job to his mother. Says she: "He paid me a salary, but he made sure that he made a profit, believe me." These days Lewis still believes in delegating work. In the acquisition of McCall, he allowed its two top executives to take an ownership stake in the company as a way of motivating them. Then Lewis set goals for the managers, but refrained from looking over their shoulders. He is expected to stay out of the day-to-day operations of Beatrice International as well. "We rely on managers to understand their businesses," says Lewis. "I want the people who work for me to look at challenges, roll up their shirt sleeves, and get to it."

Lewis is no easier on himself. Rising before dawn in his Manhattan brownstone house, he puts in eleven-hour workdays. He has a reputation for being an intense and demanding perfectionist who hates to lose, even in a tennis match. Says TLC Counsel Charles Clarkson: "Some people may say that he is difficult, but he focuses on what has to be done."

Though Lewis may want to be thought of as just another tycoon, he is also an inspirational symbol -- the first black businessmen to gain full access to the giant pools of capital on Wall Street. Says Earl Graves, publisher of Black Enterprise: "The Reg Lewis deal will be recorded in the pages of black business history as a landmark, a sign of change."

With reporting by Wayne Svoboda/New York