Word: rjr
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Dates: during 1980-1989
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Takeover wars have raged on and off for decades, but corporate America has never seen anything quite like the battle for RJR Nabisco. The combatants are brandishing tens of billions of dollars and mobilizing squadrons of bankers and lawyers on a scale previously unimagined. On one side is the firm of Kohlberg, Kravis, Roberts, until now the undisputed master of the leveraged buyout. On the other is an alliance between a group of RJR Nabisco executives and Shearson Lehman Hutton, an old-line investment firm determined to break KKR's dominance of the hottest, most lucrative business on Wall Street...
...contest has already pushed the price for RJR Nabisco above $20 billion, which means that the potential buyout would dwarf the largest previous takeover, the $13.3 billion acquisition of Gulf by Chevron in 1984. The megastakes battle has taken the starch out of corporate chiefs everywhere. After all, if RJR Nabisco, the 19th largest U.S. corporation (1987 revenues: $16 billion), can be taken over by the new breed of dealmakers, is any company safe? Is Du Pont doable? Can General Electric be hot-wired? Worse, must every chief executive view a healthy balance sheet as his worst enemy, a potentially...
...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 cigarettes may be far higher than the $20 billion price tag for the company as a whole...
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...