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R. J. Reynolds Nabisco, Inc., Trade name RJR Nabisco, was an American conglomerate, selling Tobacco products and food products, headquartered in the Calyon Building in Midtown Manhattan, New York City." Investor Information 1997 Annual Report." R. J. Reynolds Nabisco. February 2, 1999. Retrieved on December 2, 1999. "Corporate Offices: R. J. Reynolds Nabisco, Inc. 1301 Avenue of the Americas New York, NY 10019" R. J. Reynolds Nabisco stopped operating as a single entity in 1999. Both RJR (as R. J. Reynolds Tobacco Company) and Nabisco (now part of Mondelēz International) still exist.
RJR Nabisco Holdings Corp. (NYSE: NGH) was the parent company of RJR Nabisco, Inc." Corporate Profile." Nabisco Group Holdings. October 1, 2000. Retrieved on December 2, 1998. After the food and tobacco businesses separated in June 1999, Nabisco Group Holdings Corp. owned 80% of RJR Nabisco Holdings Corp., which was the parent company of Nabisco, Inc." Corporate Profile." Nabisco Group Holdings. October 1, 2000. Retrieved on December 2, 2011.
Ross Johnson was the President and CEO of RJR Nabisco at the time of the leveraged buyout and Henry Kravis was the managing 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, including Morgan Stanley, Goldman Sachs, Salomon Brothers, First Boston, Wasserstein Perella & Co., Forstmann Little, Shearson Lehman Hutton, and Merrill Lynch. Once put in play by Shearson Lehman Hutton and RJR management, almost every major Wall Street firm involved in M&A launched frenzied, literal last-minute bids in a fog of incomplete or misleading information.
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. It was accepted because 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 Johnson's unprecedented golden parachute deal. Time magazine featured Johnson on the cover of its 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?".
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 Johnson's higher payout of $112 per share. Johnson received compensation worth more than $60 million from the buyout, then left in February 1989. In March 1989, Louis V. Gerstner of American Express became the new head of RJR Nabisco.
As a result of the acquisition, RJR Nabisco divested the following divisions:
On March 21, 1991, RJR Nabisco Holdings Corp. became a publicly traded stock. In March 1999, RJR Nabisco announced the sale of the international division of R. J. Reynolds Tobacco to Japan Tobacco, creating what is now known as Japan Tobacco International,and in June of that year, the company sold the remainder of R. J. Reynolds Tobacco to stockholders. The parent company became Nabisco Group Holdings and owned 80.5 percent of Nabisco Holdings. In 2000, Philip Morris bought Nabisco Holdings. Soon after that, R. J. Reynolds Tobacco Holdings, Inc., first traded in June 1999, announced the acquisition of Nabisco Group Holdings. The deal was completed in December 2000.Eleni Chamis, "Breakup Dismantles the 1985 Union of Two 100-Year-Old Companies," Winston-Salem Journal, May 13, 1999.
After the KKR buyout
On April 27, 1989, RJR Nabisco announced it would move its headquarters to the New York City area.
Another major consequence of the buyout was that according to United States Department of Labor, in its report "American Workplace", over 2,000 workers subsequently lost their jobs, of which 72% were eventually replaced, but earning less than half of their previous incomes, suggesting that it took most of those who lost their jobs an average of 5.6 months to find new employment.
Controversy
Ads on smoking-free flights
In April 1988, RJR Nabisco fired the Saatchi & Saatchi advertising agency after their Northwest Airlines ad introducing the airline's Smoking ban. This was despite the agency only being contracted for Nabisco products, not any tobacco products.
Pandora Papers
In 2021, RJR Nabisco (before it split up) was listed in the Pandora Papers after the law firm Baker McKenzie set up shell companies in Cyprus.
Further reading
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