- RJR Nabisco
RJR Nabisco, Inc., was an American conglomerate formed in 1985 by the merger of
Nabisco Brands andR.J. Reynolds Tobacco Company . RJR Nabisco was purchased in 1988 byKohlberg Kravis Roberts & Co. in the second largestleveraged buyout in history, adjusted forinflation . Adjusted for CPI growth, the $25 billion deal would be worth $42.8 billion in2006 dollars. This is surpassed only by the2007 buyout ofTXU , an energy company, valued at $45 billion, also led by KKR.In 1999, due to concerns about
tobacco lawsuit liabilities, the tobacco business was spun off into a separate company, and RJR Nabisco was renamedNabisco Holdings Corporation . Nabisco is currently owned byKraft Foods The RJR Nabisco leveraged buyout was, at the time, widely considered to be the pre-emininent example of corporate and executive greed.
Bryan Burrough andJohn Helyar published "", a successful book about the events which was later turned into a television movie forHBO .The leveraged buyout
F. Ross Johnson was the President andCEO of RJR Nabisco at the time of the leveraged buyout and Henry Kravis was a general partner at Kohlberg Kravis Roberts & Co. The leveraged buyout was in the amount of $25 billion, and the battle for control took place between October and November 1988.Although KKR eventually took control of RJR Nabisco, RJR management and
Shearson Lehman Hutton had originally announced that they would take RJR Nabisco private at $75 per share. A fierce series of negotiations and proposals ensued which involved nearly all of the major private equity players of the day, includingMorgan Stanley ,Goldman Sachs ,Salomon Brothers , andMerrill Lynch .KKR quickly introduced a tender offer to obtain RJR Nabisco for $90 per share—a price that enabled it to proceed without the approval of RJR Nabisco's management. RJR's management team, working with Shearson Lehman Hutton and Salomon Brothers, submitted a bid of $112, a figure they felt certain would enable it to outflank any response by Kravis. KKR's final bid of $109, while a lower dollar figure, was ultimately accepted by the board of directors.
KKR's offer was guaranteed, whereas management's lacked a "reset", meaning that the final share price might have been lower than their professed $112 per share. Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Ross Johnson' unprecedented golden parachute deal. "Time Magazine" featured Ross Johnson on the cover of their December 1988 issue along with the headline, "A Game of Greed: This man could pocket $100 million from the largest corporate takeover in history. Has the buyout craze gone too far?". [http://www.time.com/time/magazine/0,9263,7601881205,00.html]
KKR's offer was welcomed by the board, and, to some observers, it appeared that their elevation of the reset issue as a deal-breaker in KKR's favor was little more than an excuse to reject Ross Johnson's higher payout of $112 per share. F. Ross Johnson received $53 million from the buyout.
An article in "
Forbes " at the time discussed leveraged buyouts. [http://www.forbes.com/free_forbes/1988/1128/192.html]The European Union Lawsuit
More than a decade after
Kohlberg Kravis Roberts & Co. took over RJR Nabisco, theEuropean Union filed a lawsuit in US Federal District Court against RJR Nabisco alleging globalmoney laundering by the corporation for variousmafia andorganized crime groups. For a description of the lawsuit, seeDillon, Read & Co. and the Aristocracy of Stock Profits, Chapter 3, [ [http://www.dunwalke.com/3_RJR_Nabisco.htm Chapter 3 RJR Nabisco] ] and copies of selected lawsuit filings listed under RJR Nabisco at the Article Resources - Organizations. [ [http://www.dunwalke.com/resources/organizations.htm Organizations RJR Nabisco] ]References
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