MBNA sale rose from the wreckage of 2 crashes

When Bruce Hammonds, chief executive of MBNA, stepped into the company’s helicopter in Manhattan with five senior executives on a Friday last month, the mood was jovial.

The executives had spent the day secretly negotiating to sell their company, one of the largest U.S. credit card issuers, to Wachovia, the big bank. Both sides had agreed to the basic outlines of the deal; the only thing left to settle was the final price.

But then the unthinkable happened: The helicopter carrying the executives back to headquarters plunged into the East River less than a minute after takeoff. Despite several harrowing moments trapped underwater in the helicopter, the executives managed to escape the crash largely unscathed.

Their deal with Wachovia was not so lucky. Four days later, Wachovia’s board voted against pursuing a purchase, deciding that MBNA’s asking price - about $34 billion - was too high.

At the time of the crash, the company said the executives were in Manhattan for a routine business meeting. But the mystery of what they were up to did not become clear until Thursday, when MBNA reached an agreement to sell the company to Bank of America for $ 35 billion.

Executives involved in the negotiations and that frightful helicopter ride reconstructed the behind-the-scenes maneuvers that led to the sale of MBNA.

The helicopter crash on that hot, humid Friday put an unwanted spotlight on MBNA, which was hoping to keep its "for sale" sign under wraps. That did not stop the rumor-mongering among an astute group of investors who frequent online message boards.

On Yahoo, the questions started almost immediately. One message was titled, "Top execs together on 1 helicopter???" Another said, "wht were 6 executive doing in chopp." A user with the logon name kennyrbowman seemed to know exactly what had happened. In a message with the header, "Reason they were all in NYC to start with …," he explained that the MBNA executives were having a "a big pow-wow with Wachovia trying to figure out how to word the takeover/buyout."

The potential leak was particularly troubling to Louis Freeh, MBNA’s general counsel, according to the executives. Freeh, who was director of the FBI between 1993 and 2001, instructed lawyers to monitor the message boards and news wires. When MBNA held a conference call with journalists the day after the accident to try to reassure investors, Freeh and only one other executive spoke. They chose their words carefully and kept Hammond and the other executives who had been aboard the helicopter from participating in the call to avoid slipping up about the potential deal.

But by June 22, keeping the deal with Wachovia a secret was moot. That morning, MBNA’s negotiators learned that Wachovia’s board had scuttled the deal the day earlier.

MBNA’s top management and its advisers, led by Michael Martin and Olivier Sarkozy of UBS, Edward Herlihy of the law firm of Wachtell, Lipton, Rosen & Katz and Joseph Perella, the veteran deal maker who left Morgan Stanley amid the firm’s turmoil in April, huddled to consider Plan B: trying to sell the company to Bank of America.

Herlihy, a longtime corporate lawyer who has worked on some of the biggest deals, picked up the phone and called Kenneth Lewis, chief executive of Bank of America, with his pitch.

By the next night, Hammonds and Lewis, who had long eyed the other’s company but had never met, were making a handshake deal over a two-hour dinner at the Wilmington Club, a historic meeting place for corporate elite in Delaware, where MBNA is based. Hammond is a member.

On the morning of June 24, an army of bankers and lawyers converged on Wachtell Lipton’s offices in Manhattan, to begin a weekend sprint to give Bank of America the opportunity to review MBNA’s records and negotiate the final details of the transaction.

The deal was especially important to the Wall Street bankers. Its enormous value would catapult the banks involved ahead of their rivals in the so-called league tables, the closely followed ranking of the banks. The transaction catapulted UBS to the second spot behind Morgan Stanley and moved Bank of America to No.4, ahead of Goldman Sachs, according to Thomson Financial, which tracks deal data. Goldman Sachs had been representing Wachovia.

Perhaps the biggest lift came to two surprise entrants: Keefe Bruyette & Woods, a boutique bank that worked for Bank of America, and the one-man-show that is Perella. The two ranked No.8 and No.9 for the quarter, ahead of banking giants like Citigroup, Lazard and Bear Stearns. All the firms stand to make several million dollars in fees each.

The deal was particularly sweet for Perella, who after leaving Morgan Stanley got involved through a decadelong friendship with Randy Lerner, the son of Al Lerner, who founded MBNA. It may be even more poignant for him because at the same time the MBNA helicopter crashed, Perella was aboard another helicopter.

As Hammonds recounted Thursday, "Anything can happen at any time and you have to make the most of everything. You do it whether you are out with your family or out playing golf. You try to make the most of every minute."