The RJR Nabisco Takeover: A Legendary Corporate Battle

The RJR Nabisco takeover, which unfolded in the late 1980s, remains one of the most legendary and contentious events in the history of corporate America. It was a takeover battle marked by dramatic bidding wars, immense financial gambles, and an unprecedented level of media attention.

**The Players:

At the heart of this corporate drama were two primary figures: F. Ross Johnson, the CEO of RJR Nabisco, a conglomerate with interests in tobacco and food products, and Henry Kravis, the co-founder of Kohlberg Kravis Roberts & Co. (KKR ), a private equity firm.

**The Takeover Bidding:

The story began in October 1988 when F. Ross Johnson proposed a leveraged buyout (LBO) of RJR Nabisco, which was then one of the largest tobacco and food companies in the United States. Johnson's bid was valued at approximately $17 billion, a staggering sum at the time.

However, Johnson's bid sparked a competitive frenzy. Henry Kravis and KKR entered the picture, competing against Johnson to acquire the company. What followed was a series of counteroffers and bidding wars, each more extravagant than the last.

**The Final Bid:

The climax of the RJR Nabisco takeover saga came in November 1988 when KKR submitted a winning bid of approximately $25 billion. This marked the largest leveraged buyout in history at the time, and it included the sale of various RJR Nabisco assets to help finance the acquisition.

**LBO and Its Impact:

The RJR Nabisco takeover was a prime example of a leveraged buyout, a financial strategy in which a company is purchased primarily with borrowed funds. This approach was widely criticized because it often led to companies being saddled with enormous debt.

The takeover also highlighted the increasing role of private equity firms in reshaping corporate America. It raised questions about the ethics of LBOs, the role of corporate raiders, and the effects on employees and shareholders.

**Legacy and Lessons:

The RJR Nabisco takeover remained a symbol of corporate excess and the drama that often surrounds high-stakes business deals. While KKR's acquisition of the company ultimately proved profitable, the enormous debt RJR Nabisco carried had lasting consequences for the company's long-term financial health.

This takeover battle also fueled discussions about the ethics and financial implications of leveraged buyouts, influencing corporate governance and regulatory changes in the years that followed.

**Conclusion:

The RJR Nabisco takeover was a financial and cultural landmark in the late 1980s, capturing the imagination of the public and leaving a lasting legacy in the world of corporate finance. It serves as a reminder of the complex and often controversial nature of major business transactions and their far-reaching consequences.