(FORTUNE Magazine) – John Teets was a CEO with Big problems. The company he ran, an unwieldy conglomerate called Dial, was flagging: Profits were down; morale was low; its brands were tired. More ominous yet, an anonymous letter, purportedly written by a longtime Dial executive, was making the rounds. The letter accused the CEO of "utilizing [Dial's] assets as if he owned them outright," including a company-owned New York penthouse and a Gulfstream jet. It claimed that Teets had used corporate assets to buy into the Arizona Diamondbacks, the new Major League Baseball franchise. It accused him of committing serious sexual improprieties (which Teets "categorically" denies). "I think it is time Mr. Teets paid the piper," the letter concluded. But even that wasn't Teets's biggest problem. No, his biggest problem was that Michael Price--legendary mutual fund manager, value investor, and, in recent years, stalker of underperforming CEOs--had taken a 9.9% position in Dial's stock, worth more than $250 million.

Once upon a time, back in that bygone era known as the 1980s, there were few things more terrifying to a CEO than the knowledge that a corporate raider--a T. Boone Pickens, a Carl Icahn, a Jimmy Goldsmith--was buying up the company's stock. Here in the 1990s, with the raiders largely extinct, it's Michael Price who can instill that kind of fear.

With good reason. It was Price, eight years ago, who grabbed control of Sunbeam and helped bring in a new CEO, Paul Kazarian. Two CEOs later, when Price again became unhappy with the company's performance, he saw to it that "Chainsaw" Al Dunlap was brought in to turn things around. This was a move that practically guaranteed large layoffs--in fact, Dunlap recently announced that half of Sunbeam's 12,000 employees would lose their jobs--but one that so excited investors that the stock price bumped up more than 50% when Dunlap's hiring was announced last summer. Price was also almost single-handedly responsible for one of the biggest deals of the decade: last year's merger of Chase Manhattan and Chemical Bank, which will result in the loss of some 12,000 jobs. But the $10 billion deal was a windfall for Chase shareholders, including, naturally, investors in Price's funds. Chase's former CEO, Thomas Labrecque, is still with the company, but he's no longer in charge. Chemical CEO Walter Shipley is running the merged bank.

And sure enough, it was pressure from Price, more than weak sales or anonymous letters, that caused Teets to announce his resignation this past summer. Trying to get the stock price up, Teets split the company in two. One of the new entities, which contained Dial's service businesses, was called Viad. But this didn't deflect Price, who strongly voiced his disapproval of the way the split-up was structured. ("Viad," he told Barron's, "is Greek for screwing the shareholders.") A week after Price filed a 13D with the SEC blasting the split-up and calling into question the company's lavish perks, the Dial board met to respond. The next day the company issued a press release. John Teets, it said, would retire in early 1997.

It's tempting to view Michael Price the way we used to view Pickens or Goldsmith--as no more or less than an 1980s-style corporate raider. And on the surface, the comparison is an easy one to make. He has in common with the raiders of yore a fearlessness--and a kind of calculated ruthlessness--in taking on big, powerful targets and bending them to his will. He shrugs off the potential public relations backlash when thousands of people lose their jobs after a Price-instigated restructuring. He harbors the same withering contempt for his targets that the raiders did, and like them, he uses the press deftly, conveying a swaggering, larger-than-life persona. He's also rich as sin: His passion is polo, where the primary piece of equipment is a $40,000 pony.

But in more important ways, he represents something new. Unlike the raiders, Michael Price is a mutual fund manager, which is to say that the pool of capital he uses to take large positions in companies--and force change upon them--comes not from wealthy institutions but from small shareholders all across the country. In other words, this is a raider with whom you and I can go along for the ride. Also unlike the raiders, Price is not in this game to take the money and run; he's in it to take the money and stay. Price is a value investor, and he views what he is doing as a way of "unlocking value" in a company; as it's unlocked, he wants to be around to reap every last penny of his reward.

Finally, and most fundamentally, Price is both the personification and the beneficiary of a sea change in the way many Americans now view the relationship between CEOs and shareholders. If for most of the postwar era the CEO was the supreme entity within a corporation, today it is widely accepted that the shareholder is boss and that his interests must come first. As Michael Price has shown repeatedly, woe be the CEO who doesn't view his chief task as enriching shareholders.

One reason Price gets his way is that many investors simply agree with what he's trying to accomplish. And what exactly is that? He doesn't bother hiding behind the sanctimonious rhetoric of the 1980s raiders--that they were trying to take over the companies and show the world how they should be run. He admits flat out that all he's trying to do is get the stock price up. And if his tactics are a little rougher--all right, a lot rougher--than those of most other mutual fund managers, well, it works, doesn't it?

Price's long-term record is sterling; his flagship fund, Mutual Shares, has outperformed the typical equity fund over the last ten years. Morningstar ranks Mutual Shares in the top 10% during that time. Over the past 12 months the fund has lagged the market by some three percentage points, which is still a fair accomplishment for a value investor in this fevered market. During the past decade, the Mutual Series family of funds managed by Price and his small cadre of analysts and stock pickers--there are now five Mutual Series funds, including a small-cap fund and a new European fund--have seen their assets grow from $2.2 billion to more than $18 billion, and Price's company, Heine Securities, may well be the most profitable fund company in the country. In the 12 months ended June 30, 1996, Heine Securities had revenues of $95 million and net income of $62.5 million--an astonishing 66% net margin. But Heine Securities exists no more; in late October, Price sold his firm to the much larger Franklin Resources for an eye-popping $628 million. If Price meets certain asset goals over the next five years, he stands to make almost $200 million more. His personal fortune is well on its way to $1 billion.

Long before he became known as a high-profile saber rattler, Michael Price was one of the best-known value investors in the country. Among the cognoscenti, that's still what he primarily is. More to the point, it is still how he sees himself.

Here is Price, for instance, one recent fall evening, making his way to the front of a buzzing Columbia Business School classroom. Clearly the 100 or so whispering students are anxious to hear the guest speaker's iconoclastic, no-holds-barred market wisdom. And Price does not disappoint, giving them what amounts to a stream-of-consciousness primer on value investing. "When most people look at the day's stock tables, what do they turn to first?" he asks in an easy, confident voice. "The day's most active stocks. Why? Who cares about volume? I look at the day's biggest decliners," he says with a quick grin. "I love to read about losses."

That, of course, is the essence of value investing: Find Wall Street's lumps of coal--the distressed companies, the bankruptcies, the cast-offs--and sell them only after they've been squeezed into diamonds. Always, the goal is to find hidden value in a company that others either can't see or can't unlock. "We like to buy a security only if we think it is selling for at least 25% less than its market value," Price says. Bankruptcies? He loves them. Bankrupt companies, he notes matter-of-factly, fall off Wall Street's radar screen. "When a company gets into trouble and starts to miss its earnings, analysts drop coverage because they don't want to embarrass their firm with bad calls. So mainstream Wall Street isn't looking anymore. Which pond would you rather fish in, one with a lot of fishermen or only a few?"

He sneers at Wall Street in any case--"Why would anyone wait for an earnings report from an analyst at Morgan Stanley?" he asks incredulously. He moved his firm out of Manhattan in 1988 and set up shop in Short Hills, N.J., near his home, the better to be closer to his children--he went through a difficult, and expensive, divorce recently--and his polo ponies. For its part, Wall Street doesn't seem to miss him much. "Is he still as arrogant since his divorce?" sniffs one Wall Street player. Price's handful of Wall Street allies tend to be other iconoclasts or value players, such as recently retired hedge fund manager Michael Steinhardt or billionaire investor Laurence Tisch.

As for growth investing, don't get Price started. "What is a growth stock anyway?" asks Price. "Five years ago Wal-Mart was $25, and Sears was $31. Wal-Mart was on top of the world, and no one wanted to touch Sears. Yet we saw all kinds of value there. We bought Sears at $31. Today it's $50. Plus they spun off Allstate, which is now $58, and Dean Witter, which is now $64. You get a percentage position in each of those. Add it up, and you've got a total of $100. Meanwhile Wal-Mart has gone nowhere: It's still selling for $25. So maybe Sears was the growth stock. It was the one that grew, right?"

Of course one thing that separates Price from most other value investors is that he more than occasionally gets involved in speeding along the process of squeezing the coals into diamonds. He and his lieutenants contend that when that happens, it's just another form of value investing. "Look," he says, "I'm just trying to find cheap stocks and realize the value." If unlocking that value means ousting a CEO, so be it. "With Dial," says Jeff Altman, one of Price's top analysts, "you had a bad guy there. That was the value."

Michael Price learned his trade at the feet of a celebrated value investor, the late Max Heine. Price, who grew up in Roslyn, New York, on Long Island, went to work for Heine, his father's stock broker, in 1975, a few years after graduating from the University of Oklahoma. ("My father went to Wharton, but they wouldn't let me in because I had lousy grades, and I loved football, so I went to Oklahoma," Price explains.) Max Heine, a German Jewish refugee, had set up Heine Securities to invest his friends' money. The firm's single mutual fund, Mutual Shares, had about $5 million in assets.

Heine was an avuncular sort, with a thick old-country accent and a gentle nature. "He never yelled at you when you were wrong, but was free with praise," recalls one analyst who worked with him. But he had a genius for security analysis. "Max had a brilliant mathematical mind," says Bruce Crystal, a former Heine Securities hand. "I remember one company that had a portfolio of securities. Max had a list of shares and he would instantly calculate what they were worth." He was also a classic value investor. Just as Warren Buffett learned about investing at the knee of Ben Graham, so did Price learn from Heine, who set about passing on his investing principles to his new protege. Recalls Price: "Max taught me that if you really wanted to find value, you had to do original work, digging through stuff no one else wanted to look at."

Price caught on quickly. "Michael was always very good at piecing stuff together," recalls a former employee. "I remember a paper he wrote about a Canadian conglomerate. It was incredibly complicated, but even more impressive was that Michael had used it to figure out what the CEO was going to do next. He has that sense--of how to get deals done, of what businessmen would do."

By the early 1980s, as Price was becoming the dominant presence at Heine Securities, he and Heine worked out a deal whereby Heine remained the principal owner of the firm (he had 99 shares to Price's one), but the profits were split more or less equally between the two men. And in 1986, when Heine was 75 and ready to retire, he worked out another deal with Price to ensure that the latter would wind up sole owner of Heine Securities. They agreed to continue splitting the profits so long as Heine was alive--and they also agreed on the sum Price would pay for the firm when Heine died. The size of the payment would depend on when Heine died. (If he died in 1986, Price would pay the estate $8 million; if he died in 1987, the price would be $6 million; in 1988, it would be $4 million; after that, $2 million.)

Less than two years later, Heine was dead--hit by a car in Arizona while crossing a road. So according to the schedule, Price was able to buy his mentor's firm for $4 million. Price says he actually shelled out somewhat more than that because he continued to pay Heine's share of the firm's income to the estate for some undetermined period. But even so--and even though the assets of the firm were a fraction of what they are today--it was still a rock-bottom price. A value, you might say.

One thing you can never accuse Michael Price of being is avuncular. It's another fall day, and Price is in his Short Hills office--a single floor of a modern building in a nondescript office park: a value investor's office. Although Price is less involved in the day-to-day decision-making than he used to be, he still sits at the head of a T-shaped trading desk in front of his 12 traders. Posted around his computer screen are a number of revealing totems. There's a schedule for the fall hunt season at the exclusive Essex Hunt Club; a University of Oklahoma football schedule; a photo of his favorite CEO, Al Dunlap, pointing a pair of six-shooters. He also has a picture of the great old Green Bay Packer linebacker Ray Nitschke. "He wasn't the flashiest, but he was tough," says Price admiringly. "He was in your face."

Flanking the traders are the brains of the operation, his analysts, led by four senior people. "The press gives me far too much credit," says Price. "These guys do incredible work." Actually it's not surprising Price got all the credit; until recently, he had done little to make his analysts known to the public, preferring to be the firm's public face. In fact, Price doesn't really do much actual research these days. Instead he acts as a kind of value godfather, a sounding board to his analysts.

One of the things that quickly becomes clear is that while they may not be growth investors, Price's people are certainly traders. They spend their days buying and selling stocks, just like everyone else in the fund business. "I'm selling some First Chicago here and some ITT," says trader Bill Dalton pointing to his screen. "I'm buying some Foundation Health." They are trading for all five Mutual Series funds. Four of the funds have Morningstar's highest rating, five stars. (The fifth, Mutual European, is too new to be rated.)

All five funds are value funds, of course, for that is the only kind of investing Price believes in. Like Heine, Price has passed on to his acolytes a style of investing that requires digging and original research, relying on primary documents rather than Wall Street analysts. He and his staff tend to talk fast and talk complicated, launching into discussions about debt restructuring, cash flow, and lawsuit valuations, always searching for value they can unlock one way or another.

What also quickly becomes clear is that working for Price is no picnic. A visibly impatient man, he has little tolerance for small talk or social niceties. He doesn't lavish praise the way Heine used to but cuts in with brusque, no-nonsense questions: "Who owns the subordinated paper?" "Why don't we buy the converts instead?" One of his favorite lines is: "You have exactly 30 seconds to tell me why..."

"He's mercurial," says one ex-employee. "One day he's warm and your best friend, and the next day he's cold and you don't know why." Says one of his top charges, Larry Sondike: "Look, some [employees] can't stand the pain." Best not whisper into a phone in front of Price; he might demand to know whom you're speaking to. "One time he asked me who I was talking to," says one of his traders. "And I said, 'Say hello to my wife, Michael.' " Price shrugs. "I'm paying them; if they don't like it, they can leave."

He has also been toughened up over the years by a series of setbacks that began shortly before Heine died. In 1988 the SEC made Price return well over $1 million to his own funds. According to the SEC, he and Heine had traded for the funds through a brokerage firm in which they themselves were principals and were collecting half the commission without disclosing that fact to the fund shareholders. The lack of disclosure is what caused the SEC to crack down. "We had some very bad advice back then," Price now says.

The SEC fiasco was followed by a stretch of uncharacteristically poor investing moves. Price lost some $30 million in Macy's bonds, which plummeted after the giant retailer's LBO ran into trouble (see Books). And in 1989, Price lost some $100 million on Time Inc.'s merger with Warner Communications. Price was betting that Delaware's Chancery Court, which had jurisdiction over the deal, would block the Time-Warner merger and allow Paramount Communications to carry out a hostile bid for Time. Instead the court ruled against Paramount, and Time merged with Warner. (Time Warner is FORTUNE's corporate parent.) The ruling still burns Price up.

For Price the worst of it came in the fall of 1990. On July 17, 1990, the Dow Jones industrial average peaked at 2999. Then the Gulf war erupted, and the Dow dropped 21% in three months. It was not Price's finest hour. Price's firm had about $5 billion in assets, but when the market started to tumble, redemptions flooded in at a rate that one source says hit $100 million a week. According to several sources, Price panicked. In October he had a two-hour lunch with his friend Robert Pirie, who was then the CEO of the investment banking firm Rothschild Inc. Pirie told Price that he and financier Jimmy Goldsmith were convinced the market was headed even lower. After lunch, Price called one of his traders, Ephraim Karpel, from his car phone. He told Karpel that he would be back in 90 minutes and that he wanted Karpel to start selling some $400 million in securities immediately. "Ephraim basically said, 'Listen up, we have to sell $400 million worth of stuff,'" recalls someone who was there. "There was an outcry, and some analysts balked. Some of those people are no longer with the firm." (Price says the amount was closer to $40 million than $400 million.)

But Price's judgment turned out to be completely wrong, and his funds paid a heavy price. He sold RJR bonds--and many other securities--as they were nearing the bottom. When the market turned back up in early 1991, Price, heavy in cash, missed much of the gain. His funds underperformed the market in 1989, 1990, and 1991 before righting themselves.

And Price learned a lesson that the veteran investor should have known long ago, as he now concedes: "Never, never pay attention to what the market is doing."

If old-fashioned value investing is what made Price's original reputation, it's his public, pointed--and usually successful--forays into underperforming companies that have made him notorious. Surely it is no coincidence that the assets in his firm have nearly tripled in the past three years--which is to say, in pretty much the same time that he was becoming known as a rapacious shareholder who doesn't take no for an answer. The press eats up his pugnacious style and his nasty sound bites, and have provided him with the kind of free advertising that other mutual fund managers can only dream about.

Price denies that there's anything new about his shareholder-activist persona. "We sued a company called Indian Head in 1975," he insists. "We filed a 13D against management on Sooner Federal Savings & Loan in 1981. We were active in Penn Central, in Storage Technology, in AM International." And while that's all true enough, Price doth protest too much. What changed in the 1990s was both the size and the scope of the Price attacks--and the astonishing ambition they revealed. It was one thing, after all, to go after Sooner Federal, quite another to take on Chase Manhattan.

A number of factors coalesced in the 1990s that helped propel Price along his current path. For one thing, as his funds grew larger he needed to buy stocks with larger market capitalizations in order to have the same impact on the funds. For another, the overheated bull market we're in right now has made it increasingly difficult to find old-fashioned value stocks--stocks that would eventually "unlock their value" without Price having to turn the key personally.

Finally, a 1992 change in the rules governing institutional shareholders helped unleash Price. The old law prevented stockholders from sharing information with each other without going through expensive and onerous proxy filings. The new laws specifically allow groups of shareholders to communicate without triggering the proxy requirements. And large shareholders can also now publicly announce how they plan to vote on issues without having to file a proxy--a point of law that had previously been muddy. In his battle with Chase, Price clearly took advantage of this new regulatory environment.

The Chase battle, without question, made CEOs sit up and take notice. When Price forced the sixth-largest bank in the country, a white-shoe institution if ever there was one, to merge with Chemical, the message was heard in the far corners of corporate America: If you find yourself in Michael Price's cross hairs, watch out--he uses real bullets.

The origins of Price's Chase blitzkrieg go back to early 1994, when Price's banking analyst Ray Garea set his sights on Michigan National, a smallish, poorly performing bank in Farmington Hills, Michigan. Price bought 5.5% of the stock and soon declared the best way to realize the value of the bank would be to sell it. A year later, Michigan National sold out to the National Australian Bank for $110 a share. Price's take: close to $50 million.

And then ...

Garea picks up the story: "It was a Friday, and we had just finished Michigan National, and Michael asked me--he was kind of kidding--'So, Ray, who's the next target?' And I looked at him, and I said, 'I think we should do Chase.' And he looked at me like I had lost my mind."

Garea told Price that the stock, which he figured was worth $60, easy, was trading at $33. "I don't believe you," Garea recalls Price saying. "Give me some stuff to look at over the weekend."

"On Monday morning," says Garea, "Michael walked in, and I could see it in his eyes from down the hall: We were going to do Chase."

With $120 billion in assets, Chase was a huge institution. But it also had had an undistinguished record over the past few years, and its stock had lagged other bank stocks. "I basically discovered Chase at one of those Wall Street dinners," says Garea. "Tom Labrecque [Chase's CEO] would talk about the bank, and then afterward all these buy-side guys [institutional investors] would crowd up to him and ask him how come he wasn't doing anything about the stock." He adds, "I told Michael that if we were going to do Chase, he needed to understand that he had to be aggressive, otherwise nothing would happen."

And so it began. Price already owned a smattering of Chase stock; now he started buying heavily. From February 13 to March 3, he and Garea quietly bought about 3.7 million shares of Chase. Garea put in a call to Chase's head of investor relations, Bill Maletz, requesting a sit-down with Labrecque. "Why do you want to see him?" asked Maletz. "Because we own a fair amount of stock," replied Garea. "How much?" asked Maletz. "Over $100 million," said Garea.

Several weeks later, Price and Garea drove into Manhattan to meet with Labrecque and Maletz. The script was a familiar one: Price told Labrecque he thought the stock was undervalued; the Chase CEO agreed but said he felt that within two years it would be substantially higher; Price replied that the time frame was too long. He and Garea suggested selling various businesses or spinning off divisions. Labrecque said no; in fact, he said, he wanted Chase to continue to be an important global bank. Price was unimpressed. "What does financing car loans in New Jersey have to do with lending in Kuwait?" he says. As they stood on the sidewalk after the meeting, Garea turned to Price and asked, "What do you think?" Price didn't pause. "I think we should buy more stock."

(Labrecque declined to be interviewed for this story. A Chase spokesman said, "I think Tom Labrecque's last public comments on the Michael Price situation were that it wasn't smart to break up the company. He [Labrecque] wouldn't be adding any value to comment further, especially with Michael Price being such a big shareholder.")

All through March and early April, Price and Garea bought another 7.2 million shares, giving them a total position of some $375 million. By the time they were done, Heine Securities owned 11.1 million shares, or 6.1%, of the bank's stock. That, of course, meant the firm had to file a 13D, since the holding had passed the 5% threshold. This Price did on April 6, at which point the whole world knew what he was up to. Almost immediately the stock climbed from $38 to $41 share.

It was at this time that Price really swung into action, demonstrating just how much you can do these days with 6% of a company's stock. Taking advantage of those new SEC rules, he began contacting major shareholders, such as the brokerage firm Sanford Bernstein and Dallas money manager Barrow Hanley Mewhinney & Strauss. "We found out that Tom Labrecque visited these people too, but every time, he was a week behind us," says Price. "I think that's when he realized he had a problem." Meanwhile, Price's allies--Larry Tisch and others--began buying the stock, which helped Price's bargaining position.

By the middle of April, rumors were flying. One of the most widespread was that NationsBank was looking to acquire Chase. The rumor gained steam when NationsBank CEO Hugh McColl confirmed that Chase looked attractive. On April 18, in this overheated atmosphere, Chase held its annual meeting. It was a long, drawn-out affair, but finally, after nearly two hours, Price rose to speak. "Dramatic change is required," he reportedly said, addressing Labrecque. "Unlock the value, or let someone else do it for you."

"I think the guys on the 17th floor of Chase Manhattan Plaza [the executive floor of Chase] were in shock," recalls one Chase insider. "They had no plans for anything like this. They never saw it coming." A week later, Price and Garea held a second meeting with Labrecque. Again the Chase CEO refused to make any commitment to change anything. But in fact he was about to take some action--though it was too little, too late. In May he brought in a cost-cutting consultant. In June he announced plans to slash expenses by some $400 million. Meanwhile he had retained Goldman Sachs, Chase's longtime investment banker. Whether he knew it nor not, he had just put Chase in play, as they used to say in the 1980s. By August the stock had climbed to $53.

This time the price run-up was being driven by a new rumor--that Chemical Bank was poised to buy Chase. And the rumors were true: Labrecque had decided to sell to Chemical (though Chemical would keep the more prestigious Chase name). On Sunday, August 27, Labrecque phoned patriarch David Rockefeller at his house in Seal Harbor, Maine, to give him the news. The next morning the deal was announced. In a stock swap, Chemical would give Chase shareholders 1.04 shares of Chemical stock--then worth about $60--for every share of Chase they owned. Price couldn't have been happier. "We love this merger," he was quoted as saying at the time.

After the merger Price met with Labrecque and Chemical CEO Walter Shipley several times to ensure the new bank would continue to make moves to boost its share price. It has. Today the stock trades at $89, giving Price a total windfall of more than $500 million. "We've sold a little bit," says Price, "but we still own over $1 billion worth. Chase has a low P/E. It can make $2 billion worth of savings, and it still owns all kinds of businesses it can sell off."

On Wall Street, Price's battle with Chase was controversial, and Price was viewed as arrogant for the way he bullied the bank. "Should I really be telling the CEO of Chase Manhattan what to do?" wonders one high-profile value investor. But Price has his defenders too. "Price is not selling doctors and dentists a short-term ride," says Bruce Greenwald, a professor of finance at Columbia University. "He's held his Chase stock. He's a disciplined investor, so he'll stay as long as there's value."

Price himself, needless to say, has no regrets at all. "We are just asserting our rights," he says. "It's about getting respected. It's about being right." And the 12,000 jobs that will be lost because of the merger? Price is equally blunt. If the bank had not been forced to do something drastic, he says, its long slide would have continued indefinitely. "Maybe all the jobs at the bank would have been lost."

In the wake of the Chase deal, Wall Street has a new expression. "I bought a piece of a small bank in New England," says one New York money manager. "And I'm talking to the bank's CFO, and he says to me, 'You aren't going to Michael Price me, are you?' "

And then came his best deal of all: the sale of his firm, this past October, to Franklin Resources, a family-controlled firm, based in San Mateo, California, with $169 billion in assets .

Franklin is a hugely successful marketer of load mutual funds, which it sells through brokerage firms. It has also proved it can successfully acquire other fund companies: Its 1992 purchase of the Templeton Fund Group, led by the legendary investor Sir John Templeton, is widely considered a model for the rest of the industry. "It's been a first-class success," says Goldman Sachs investment banker Milton Berlinski.

Surprisingly, Franklin was initially reluctant to look too closely at Heine Securities. Or perhaps it's not so surprising. As Chuck Johnson, president of Franklin Templeton Worldwide and son of CEO Charles Johnson, says wryly, "You have to ask yourself why you're buying something when the smartest man on Wall Street is selling it."

Yet Franklin was looking to expand again, and there was Price, actively shopping his company. Why? "I was spending more time administrating and less time picking stocks," explains Price. "A company this big can't be run by one person." But his friend Larry Tisch has a different theory. "I think he thinks the market was getting overvalued, and it was a good time to sell." A third possibility: Price realized that the fund industry is entering a period of consolidation in which smallish firms like his will eventually be left behind.

Whatever the case, the mating dance soon began. Franklin, with its strong international and fixed-income funds, was weak in the hot equity fund area--precisely where Price was strong. So this past March, Charles Johnson and Franklin CFO Marty Flanagan went out to New Jersey for a meeting with Price and his lieutenants. "The personal dynamics felt right," says Flanagan, "and the numbers looked good."

And one other thing. "Michael Price was almost eerily similar to Templeton," says Chuck Johnson. "You had a high-profile guy with a superior investing strategy who's still involved but has a great team, who has spent no money on marketing." Although several other fund companies were circling around Price, Franklin was prepared to pay more money--and to pay most of it in cash.

There was the usual huffing and puffing--and perhaps bluffing, with Price at one point stalking out of a meeting saying, "That's it, I can't do it for that price"--but eventually the deed was done. And what a deed it was! A man who had bought his firm for somewhere around $4 million in 1988 was selling it eight years later for $628 million--with additional incentives that could well bring the final total to more than $800 million. It's all going directly to Price, since he's the sole owner of Heine Securities. (According to a proxy filed with the SEC in August, Franklin will also pay Price's top five guys some $40 million, to be split among them.) Some casual observers found the price rich, but not those in the know. After all, Franklin is paying about ten times this year's pretax earnings. Other recent mutual fund deals, such as Invesco's $1.6 billion merger with AIM, are being done at multiples between eight and 12.

The incentives are based on the continued asset growth of the funds; to receive the full payout, Price will need to have about $33 billion under management by 2001. Unless the market enters a prolonged slump, Price is almost a cinch to get there. For one thing, Price is now a bona fide fund superstar, and as it proved after its Templeton acquisition, Franklin knows a thing or two about marketing fund superstars. Beginning this month, Franklin will begin plastering ads featuring Price in magazines and newspapers across the country. Price will also introduce two new variable-annuity funds this month, which along with his already existing funds will be pushed by Franklin's network of brokers--with a new 4.5% front-end load (existing shareholders will be grandfathered load free). "We would like nothing better than to write Michael another check for $200 million," says Chuck Johnson.

The buyout of Price's firm raises two significant questions, though. The first is whether he will continue to run the Mutual Series funds. Certainly Franklin and Price would like to give the impression that Price will rule over his kingdom for years to come. "I'll be around for five years," he said at his last independent shareholder meeting in late October. But a close look at the prospectus reveals he doesn't have to. In fact it specifically states that he can work part-time after one year and quit altogether after two. "That's just language the lawyers made me put in," says Price with a dismissive wave of his hand. To which one is tempted to ask: Whose lawyers?

The second question is whether he will still be willing to unlock value by rattling the cages of America's underperforming CEOs now that he is part of a larger institution. It's a sticky question because most big-fund families shy away from such behavior. John Neff, for instance, the well-known (and recently retired) manager of Vanguard's Windsor fund, was also a Chase shareholder. But unlike Price, he simply sold the stock. And will a big consumer-oriented mutual fund company really want to be tarred in the public mind by association with the like of Al Dunlap, who just announced that he would eliminate half the jobs at Sunbeam? His arrival at Sunbeam, remember, was largely orchestrated by Price (see box).

For his part, Price insists that his funds won't stop, as he puts it, "asserting their rights." So far, at least, that seems to be the case. Not long ago, Price began buying stock in Dun & Bradstreet. Soon after, D&B's CEO, Robert Weissman, divided the company into three. One, called Cognizant, is being run by Weissman. But Price still isn't happy. He's grousing that Weissman "has done a miserable job for five years." He's spoken with management to air his complaints. He's contacted other shareholders.

There he goes again.

REPORTER ASSOCIATES Maria Atanasov, Tricia Welsh