Wachovia had balked at MBNA's high price

Credit-card firm then cut deal with Bank of America


NEW YORK - When Bruce L. Hammonds, the chief executive of the MBNA Corp., stepped into the company's Sikorsky S76C at the heliport at 34th Street in Manhattan with five senior executives on Friday afternoon two weeks ago, the mood was jovial.

The executives had spent the day secretly negotiating to sell their company, one of the nation's largest 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 MBNA executives back to the Delaware 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 yesterday:

Hammonds and his colleagues, who returned to work and a series of marathon conference calls only 24 hours after the accident, were scrambling to sell their company, ultimately reaching a deal with 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 rumors from flying 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 titled, "Reason they were all in NYC to start with ...," he explained that the MBNA executives were having a "a big powwow with Wachovia trying to figure out how to word the takeover/buyout."

The potential leak was particularly troubling to Louis J. Freeh, MBNA's general counsel, according to the executives. Freeh, a former FBI director, instructed the 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 Wednesday morning, 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 a day earlier.

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

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

By the next night, Hammonds, 57, and Lewis, 58, 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, an historic meeting place for Delaware's corporate elite. Hammond is a member.

"I have not crossed paths with Bruce before," Lewis recalled yesterday. "I don't go to the Financial Services Roundtable."

One of the first topics they discussed was Hammond's role in a combined company.

"I wanted to know what he wanted to do," said Lewis of Hammond, who will become chief executive and president of Bank of America Card Services. "I knew of Bruce by reputation and wanted him to stay, so we got past that topic pretty quickly."

On Friday morning, an army of bankers and lawyers converged on Wachtell Lipton's offices in the CBS building on 52nd Street 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. The deal's enormous value would catapult the banks involved ahead of their rivals in the so-called league tables, the closely followed ranking of the banks that is used to pitch prospective clients and for bragging rights on the golf course.

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