R. J. Reynolds Tobacco Company was founded in Winston-Salem, North Carolina, in 1875 and changed its name to R. J. Reynolds Industries, Inc. in 1970. It became RJR Nabisco on April 25, 1986, after the company's $4.9 billion purchase, and earlier 1.9 billion stock swap, of Nabisco Brands Inc. in 1985.[5] On May 7, 1986, one week after the merger, RJR Nabisco sold Del Monte's frozen foods unit to ConAgra Foods,[6] followed by the sales of the soft drink brands Canada Dry and Sunkist to Cadbury Schweppes on June 3, 1986,[7][8] the KFC fast-food chain to PepsiCo on July 25, 1986,[9] and Heublein to Grand Metropolitan on January 17, 1987.[10]
Headquarters move
In August 1986, the RJR Nabisco board announced that F. Ross Johnson would replace J. Tylee Wilson as head of the company effective January 1, 1987. Soon after, Johnson, believing "bucolic" Winston-Salem did not have the right image for a "world-class company", began seeking other possible headquarters cities. After ruling out New York City and Dallas, the company decided on Atlanta because it was "nouveau riche and overbuilt".[11] On January 15, 1987, the RJR Nabisco board approved a headquarters move from Winston-Salem to Cobb County, Georgia, north of Atlanta, where the company had rented space. The move would affect 250 to 300 employees, while Winston-Salem would still have 14,000 people working for the company. RJR Nabisco donated the 519,000-square-foot World Headquarters Building to Wake Forest University but continued to use it until the September 1987 move.[12] Later, RJR Nabisco's Planters-Life Savers Division moved to the former headquarters building.[11]
KKR leveraged buyout
The RJR Nabisco leveraged buyout was, at the time, widely considered to be the preeminent example of corporate and executive greed. Bryan Burrough and John Helyar published Barbarians at the Gate: The Fall of RJR Nabisco, a successful book about the events which later became a television movie for HBO.
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.
After the KKR buyout
On April 27, 1989, RJR Nabisco announced it would move its headquarters to the New York City area.[15]
As a result of the acquisition, RJR Nabisco divested the following divisions: 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.[24]
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.
