Reuters Headquarters, 85 Fleet Street, London
y spring 1984, UPI was again running out of cash. Desperate to stave off the loss of control that would come with bankruptcy of UPI, Ruhe had decided to sell off UPI’s crown jewel, its newspicture service. This was an international enterprise that sold pictures of breaking news from around the world to all UPI’s newspaper clients. Mike Hughes, UPI’s head of the picture service, thought the estimated cost to recreate the asset would be on the order of $25 million. Ruhe began secret sale negotiations in Brentwood with Peter Holland, an executive of the London-based Reuters.
Holland must have seemed certain he would shortly strike a deal with Ruhe. Reuters was about to go public in a stock offering and in a June 4, 1984, sale prospectus stated that it would soon enter into a five-year joint venture agreement that would obtain UPI’s overseas picture business for $7.5 million. This was even before Holland got on an airplane to Nashville to firm up the details of the deal.
Not long after he arrived, Ruhe called me into his Brentwood office where he was meeting with Holland and told me to memorialize in a memo the terms of the agreement they had just struck. UPI was to get an immediate infusion of $3.3 million in cash, with another $2.4 million in 60 monthly installments. In return, Reuters would acquire UPI’s foreign photo staff and send Reuters pictures of American news events. UPI would receive the non-U.S. pictures of the expanded Reuters service but would have to let Reuters gain a foothold in the U.S. by permitting its output to be sold to such large papers as the Washington Post, Baltimore Sun and New York Times.
Shortly after news of the deal leaked, Linda Neal and Bill Alhauser met Ruhe for breakfast. When both raised questions about the deal. Down to the Wire reports Ruhe shut them down saying, “Look, the deal is done! Just get the thing signed!” At that point, I got on the next plane to London to negotiate the formal terms and legal details of the agreement that both parties would sign. Not surprisingly, this turned out to be a very one-sided affair.
Normally in a contract negotiation there is always some back on forth as the secondary business terms are put to paper. Holland was quite smart and new that there was little leverage on the UPI side to negotiate even minor points. Nonetheless, Holland and I closeted ourselves in the Board of Directors room of the Reuters headquarters at 85 Fleet Street in London and started our discussions. Watching over our negotiation across the large boardroom table was a portrait of founder Paul Reuter staring down at us.
Paul Reuter (1816-1899)
We had made some progress during the daylight hours when the unexpected occurred. After a knock on the door, we were served with papers issued by a New York court stating that signing the agreement and going ahead with the transaction was prohibited.
Once the shock wore off, we began assessing this development. We ultimately decided to ignore the development and proceeded to finalize the agreement. This took hours and had us spending the night in the board room. Then, we not only had to wait for the papers to be typed up in final form, but we had to wait for Ruhe to fly in from Nashville to sign them. Holland relieved the boredom of our board room siege in the early morning hours by breaking out a bottle of Scotch from a hidden Reuters liquor stash. He proved to be a delightful and convivial business opponent as we took a break waiting for the typing to finish, still on the opposite side of the table.
Back in Nashville, Jack Kenny, the newly hired financial operating officer brought in at Foothill’s insistence to cover for the inexperience and befuddlement of Alhauser, was beginning to clear some of the most pressing vendor invoices. He was being helped by a new Controller, Peggy Self, who had also been brought on as his assistant. They had been hired after Foothill, worried about UPI defaulting on its $4 million loan, had assessed Alhauser as inadequate to the task of managing the company’s finances.
When Kenny and Self arrived in spring 1984, they were immediately confronted with a host of angry creditors and little cash to pay them with. Both were quickly appalled by Ruhe’s instructions to pay his consulting friends and cronies ahead of critical UPI suppliers.
With the $3 million of cash immediately in hand from the Reuters closing, Kenny quickly covered the immediate payroll due, followed by checks to the creditors that were by that time threatening lawsuits for nonpayment. By the time Ruhe had returned to Nashville from signing the Reuters agreement in London, the Reuters cash was completely gone.