Word: dealing
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Dates: during 1980-1989
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...cleverest financial gimmicks of all time. An investor group, which often includes some of the target company's top managers, borrows billions to take the firm private by buying its stock from the shareholders. The company's own assets are used as security for the financing. After the deal is completed, the new owners usually try to bring their debt down to a manageable level -- and pick up enormous profits along the way -- by selling off parts of the company piecemeal. In the case of RJR Nabisco, the total market value of popular individual brands like Oreo cookies and Winston...
...partners." Agrees Gus Oliver, a general partner in Coniston Partners, another Manhattan investment firm that specializes in takeovers: "KKR's success reflects the compounding effect. Because of its track record, it can attract all the capital in the world. Because of its capital base, it can do any deal in the world...
Maybe, but the RJR Nabisco deal will put that assertion to a stern test. The struggle for the huge company began two weeks ago, when it was announced that a group of managers led by chief executive Ross Johnson, 56, was considering making a $17.6 billion buyout bid, to be put together by Shearson -- not KKR. The announcement came after Johnson delivered a startling message to the RJR Nabisco board of directors: "This company ought to be in play." News of the buyout proposal stunned Henry Kravis, who felt betrayed by Shearson's chairman, Peter Cohen. For one thing, Kravis...
Determined not to let the RJR Nabisco deal get away, Kravis demanded that Cohen come by KKR's Manhattan offices. Chewing out Cohen in front of Shearson aides, Kravis demanded a major role in the buyout, sputtering, "This is my franchise!" Cohen walked out, suggesting they talk again in a few days. But before that talk took place, Kravis delivered a thumping counterpunch: a $20.6 billion buyout bid for RJR Nabisco...
...mammoth deal is completed, it will intensify the debate about whether leveraged buyouts are good or bad for American business. Proponents point out that the stock market has severely undervalued many companies. Thus the only way shareholders can get fair value for their investment is through a buyout. Another argument in favor of the trend is that by breaking up conglomerates, buyout specialists create more efficiently run businesses...