Word: tobacco
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...always run by tradition, I would probably still be an accountant for the General Electric Co. In three years, we averaged earnings up nearly 70%. Nothing happened ((to the stock price)). Then we had Black Monday. Stocks went down. It really became evident that this business, especially the tobacco business, should be run as a private business. The shareholders, who are the people who invest in this thing, aren't making...
...There is risk. Less at $75 per share than at $100 per share. At $100 per share, I will have to sell off more businesses. But our tobacco business can stand a lot of leverage. It's the sheer size of this thing that makes everybody shake their heads. I've felt like an Iranian hostage for the past 43 days. You say, would you have done this if you had it to do over again? And my answer is yes. I can look every day into the mirror and say this was the right thing...
...only three years ago as a brilliant strategic move. "What is being done threatens the very basis of our capitalist system," said John Creedon, president of Metropolitan Life Insurance company, which is suing RJR because the potential buyout has undermined the value of all bonds that the food and tobacco company sold before the announcement. Not everyone was alarmed. Said Harry D'Angelo, a finance professor at the University of Michigan: "I don't see any major social dangers. The real challenges have been to the conventional wisdom that large numbers of shareholders provided the best means of financing industry...
LBOs do have some strong defenders, and not just among the executives who grow rich from them. Some financiers and economists argue that increased leverage can be a benefit to companies, especially those in mature industries like tobacco. Reason: these businesses produce a lot of cash but call for relatively little research or development. For them, one efficient way to distribute profits to shareholders is simply by buying up stock...
...Kohlberg Kravis Roberts, the Manhattan socialite, 44, countered Johnson's proposal by offering to pay as much as $21.6 billion for the Atlanta-based company. As RJR's new owner, Kravis, whose firm also controls Beatrice and Safeway Stores, would probably keep the food divisions and sell the tobacco business...